Reg FD and the Competitiveness of All-Star Analysts.

This paper examines the impact of Regulation Fair Disclosure (Reg FD) on the competitive advantage of All-Star analysts. We find that Institutional Investor All-Americans, chosen by the votes of institutional investors based on overall helpfulness to the buy-side, experienced a significant increase in turnover during the implementation and immediate aftermath of Reg FD. We do not observe a similar change in the Institutional Investor buy-side rankings of non-U.S. analysts or in the Wall Street Journal’s Best on the Street rankings which are based solely on returns generated from the analyst’s public stock recommendations. Furthermore, the significant change in All-American rankings is concentrated in those sectors identified by DIRI and Hutton (2005) as being most affected by Reg FD. By 2003, the competitive environment for All-Americans had stabilized, with turnover returning to (approximately) pre-Reg FD levels. This suggests that within a few years, All-Americans had built a new competitive advantage stressing aspects of performance less dependent on privileged communication with management.