Abstract
This paper examines the information environment effects of regulation fair disclosure (Reg FD). We investigate the stock market response to stock splits in the pre- and post-regulation periods. We find that abnormal returns around split announcement are positive in both periods, but the magnitude of the returns is smaller in the post-FD period relative to the pre-FD period. The difference between the pre- and post-FD period abnormal returns persists even after we control for factors that may affect split announcement returns. We also find that the magnitude of the association between announcement returns, and the unexpected portion of the split factor has increased post-regulation. Our analysis of performance trends for split firms reveals that patterns of profitability and changes in profitability in the years around stock splits are similar in the pre- and post-FD periods. However, we find that announcement returns are associated with lagged profitability changes in the pre-FD period, but with future profitability changes in the post-FD period. Collectively, our results imply that Reg FD has reduced information asymmetry and improved price efficiency.
Recommended Citation
Eng, L., Ha, J., & Nabar, S. (2014). The Impact of Regulation FD on the Information Environment: Evidence from the Stock Market Response to Stock Split Announcements. Review of Quantitative Finance and Accounting, 43(4), pp. 829-853. Springer.
The definitive version is available at https://doi.org/10.1007/s11156-013-0394-4
Department(s)
Business and Information Technology
Keywords and Phrases
Abnormal returns; Information asymmetry; Price efficiency; Regulation fair disclosure; Stock splits
International Standard Serial Number (ISSN)
1573-7179; 0924-865X
Document Type
Article - Journal
Document Version
Citation
File Type
text
Language(s)
English
Rights
© 2024 Springer, All rights reserved.
Publication Date
01 Nov 2014
