Did Regulation Fair Disclosure Level the Playing Field? Evidence from an Analysis of Changes in Trading Volume and Stock Price Reactions to Earnings Announcements

We contribute to the literature on Regulation Fair Disclosure (FD) in three ways. First, we provide evidence on whether FD has achieved its intended effect of leveling the information playing field by examining whether differences across investors' information quality prior to earnings announcements have declined after the pronouncement of the regulation. We find strong evidence of a decline in earnings announcement period trading volume attributable to differential prior precision after FD consistent with a more level playing field. Second, we re-examine whether FD has resulted in firms reducing or chilling their information flows (disclosures) to investors. Contrary to prior work, we find that there is evidence of an overall reduction or chill in information flows after FD relative to a "cleaner" pre-FD period than the pre-FD period used in other studies. Third, we document that while the leveling effect of FD is relatively wide-spread, the chill effect is driven by (i) relatively smaller, high technology firms and (ii) relatively larger firms with high book-to-market ratios. We interpret the latter result as evidence that firms with relatively high costs of public disclosure chose to eliminate the disclosure altogether rather than broadening access to the disclosure.