Investor Relations and Regulation FD

firms may be privately disclosing more information, they also appear to be publicly disclosing
more information in the pre-Reg FD period.
However, in the fourth quarter of 2000 when Reg FD came into effect, the number of
management earnings forecasts and percentage of firms issuing forecasts spikes upwards sharply
for IR firms. This implies IR firms were actively evaluating their disclosure policy prior to Reg
FD and preparing to comply with it upon implementation. Both variables continue to trend
upwards over the quarters following Reg FD and settle into a higher range. This suggests that IR
firms were selectively communicating privately with analysts and institutional investors prior to
Reg FD and the regulation had a significant impact on the public disclosure policies of these
firms.
Compared to IR firms, the control firms exhibit a delayed reaction to the implementation
of Reg FD. Following implementation, the number of management forecasts and percentage of
firms issuing forecasts spiked upwards (similar to the IR firms) but there appears to be no
reaction in the quarter Reg FD became effective (Q42000). This suggests these firms also were
communicating privately with analysts and institutional investors prior to Reg FD but were less
prepared for the new regulation and may have been non-compliant as of the fourth quarter of
2000. The control firms also do not appear to increase the quantity of disclosure in the quarters
following this spike. Instead, the number of management forecasts and percentage of firms
issuing public guidance drop in the subsequent quarters and settle into a lower range.
Figure 1 also shows visually that the difference between the two groups in terms of
public guidance became larger in the post-Reg FD environment. Table 4 shows this difference is
statistically and economically significant as well. In the pre-Reg FD period, IR firms issued an
average of 0.23 public management earnings forecasts per quarter compared to 0.10 for the
control firms (p = 0.00). The number of quarterly management earnings forecasts in the IR firm
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