The Impact of Regulation Fair Disclosure on Information Asymmetry and Trading: An Intraday Analysis

• Main Authors: CHIYACHANTANA, Chiraphol N., JIANG, Christine X., TAECHAPIROONTONG, Nareerat, WOOD, Robert A.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2004
• Subjects: Regulation fair disclosure; volatility; liquidity; adverse selection costs; Finance and Financial Management; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/708; https://ink.library.smu.edu.sg/context/lkcsb_research/article/1707/viewcontent/NewC_ImpactFD.pdf
• Institution: Singapore Management University

This study examines the impact of Regulation Fair Disclosure (FD) on liquidity, information asymmetry, and institutional and retail investors trading behavior. Our main findings suggest three conclusions. First, Regulation FD has been effective in improving liquidity and in decreasing the level of information asymmetry. Second, retail trading activity increases dramatically after earnings announcements but there is a significant decline in institutional trading surrounding earnings announcements, particularly in the pre‐announcement period. Last, the decline in information asymmetry around earnings announcements is closely associated with a lower participation rate in the pre‐announcement period and more active trading of retail investors after earnings releases.