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The Impact of Regulation FD on Institutional Investor Informativeness

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  • Douglas O. Cook
  • Tian Tang

Abstract

Although there is conflicting evidence and resulting skepticism regarding the value provided by professional investment management, Gibson, Safieddine, and Sonti (2004) document institutional investor informativeness relative to seasoned equity offering (SEO) purchases. We find that Regulation Fair Disclosure's significantly reduces institutional investors’ ability to identify mispriced SEO firms. Informativeness is diminished not by investors following analysts who have experienced a reduction in forecasting accuracy, but limiting investors’ direct access to private information. This information loss is replaced by reliance on a greater number of public information variables resulting in less consideration for prudence proxies and a liquidity motive and more for higher price momentum.

Suggested Citation

  • Douglas O. Cook & Tian Tang, 2010. "The Impact of Regulation FD on Institutional Investor Informativeness," Financial Management, Financial Management Association International, vol. 39(3), pages 1273-1294, September.
    • Handle: RePEc:bla:finmgt:v:39:y:2010:i:3:p:1273-1294
    DOI: 10.1111/j.1755-053X.2010.01112.x
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    References listed on IDEAS

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    Cited by:

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    2. Viktoriya Lantushenko & Edward Nelling, 2021. "Do more active funds still earn higher performance? Evidence from Active Share over time," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 44(4), pages 725-752, December.

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