The effect of the SEC's regulation fair disclosure on analyst forecast attributes

Abstract

PurposeThis study aims to examine the effect of the Securities and Exchange Commission's regulation fair disclosure (Reg. FD) on analyst forecast performance for pre‐Reg. FD closed‐call (CLC) and open‐call (OPC) firms compared with the non‐conference‐call (NCC) firms in the post‐Reg. FD period.Design/methodology/approachSpecifically, it examines whether Reg. FD influenced the earnings forecast accuracy and forecast dispersion of financial analysts for the previous‐CLC firms in the post‐Reg. FD period compared with the previous‐OPC firms, and both sets of conference call firms relative to the NCC firms in the same period.FindingsThe main findings indicate that forecast accuracy improved for both OPC and CLC firms compared with the NCC firms in the post‐Reg. FD period. More importantly, the differences in earnings forecast performance between the pre‐Reg. FD OPC and CLC firms had disappeared in the post‐Reg. FD period.Originality/valueThese results offer further confirmation of previous findings that Reg. FD has contributed to leveling the playing field for financial analysts and investors.