By implementing Regulation Fair Disclosure (RFD), the Securities and Exchange Commission's (SEC) intention is to ensure that all market participants have equal access to information, thereby preventing the flow of material information to analysts before other participants. We find that the negative valuation effects of profit warnings are attenuated following the introduction of RFD. This finding implies that since the implementation of RFD, the market appears to rely less on profit warning announcements. We also find that RFD has effectively reduced the leakage of material information to the analyst's favored clients, the market response to profit warnings is less negative when the issuing firm has multiple warnings, and when the warning does not apply beyond the prevailing quarter.
Journal of Economics and Finance
Sprott School of Business

Jackson, D, & Madura, J. (Jeff). (2007). Impact of regulation fair disclosure on the information flow associated with profit warnings. Journal of Economics and Finance, 31(1), 59–74. doi:10.1007/BF02751512