Regulation Fair Disclosure and Analysts' First-Forecast Horizon

Abstract

We examine the impact of Regulation Fair Disclosure (RFD) on the horizon of analysts' first earnings forecasts, that is, the first-forecast horizon. The first-forecast horizon is computed as the number of calendar days between the analysts' first earnings forecast for a quarter and the fiscal quarter-end date. We find that the first-forecast horizon has decreased by twelve days after RFD: a 6 percent decrease, on average. Analysts with average annual first-forecast horizon in the top 25 percent for each firm are classified as leaders. Leaders are our proxy for favored analysts who received guidance before RFD. The first-forecast horizon of both the leaders and the followers decreased after RFD. Examining whether the difference between the first-forecast horizon of leaders and followers decreased after RFD provides mixed evidence. This suggests that RFD may not have eliminated the timing advantage that few analysts enjoyed before RFD.