Does Reg Fd Have a “chilling Effect” on the Quantity and Quality of Corporate Information?

Early studies examining the effect of Regulation Fair Disclosure (Reg FD) report a possible chilling effect on the quantity and quality of corporate disclosures. Approved in August 2000 by the Securities and Exchange Commission (SEC), Reg FD mandates against selective disclosure of corporate information. At the time of its release, the financial community expressed concern that the regulation would limit the amount and the depth of information released to the public by management. A number of surveys suggest that Reg FD has adversely affected corporate disclosure. The purpose of this study is to compare the quantity and quality of management quarterly earnings forecasts in the preand post-Reg FD periods. Test results indicate no chilling effect as to the quantity of corporate disclosures. The level of management forecasts actually increases post-Reg FD with no corresponding decrease in the quality of the information provided; in fact, management forecast error is significantly lower postReg FD than pre-Reg FD. Furthermore, based on a sample of over 12,000 earnings revisions, analyst forecast error is significantly lower following management’s quarterly earnings estimates post-Reg FD than pre-Reg FD.