The Efficacy of Regulation Fair Disclosure

An informational advantage enjoyed by select few around material announcements was the concern raised by SEC in passing Regulation Fair Disclosure. To date, no large study has examined this question. We document stock price movements in the direction of the news two days prior to the announcements in pre Reg. FD period. After Reg. FD, pre-announcement abnormal return as a percentage of total return has decreased by 26.1% (21.4%) for large firms with good (bad) news. These findings support both the premise and the intended purpose of the regulation for large firms. Our tests failed to detect any such support for small firms