So, does accounting information matter

1
So, does accounting information matter????

• IF there are so many problemswe dont know what
  assets are, there are some problems with trying
  to show liabilities at fair value, we have
  trouble distinguishing between liabilities and
  owners equity, we have weak measurement tools
  and there are unrecorded assets, and all of these
  things affect the determination of net income

2

• Does accounting information have a purpose, and
  can it serve as a basis for business decisions????

3
Oh, the Robust Beauty of Improper Linear
Models....
4

• There was a research article published a number
  of years ago by Dawes and Corrigan with the above
  title.

5

• Any idea what this means?

6

• The thesis of the article was that a very
  simplified linear model could be used to make
  predictions that were quite efficient and
  effective, even if the underlying model was much
  more complex.

7

• What would you expect the predicting
  variablesthe drivers of successto be for
  success in graduate school?

8

• Possible variables
• Undergraduate GPA
• Quality of undergraduate institution
• Undergraduate class rank
• GMAT
• motivation
• work experience
• interpersonal and group skills

9

• All of these variables seem relevant, and there
  may be others.
• Further, the relationship might not be linear.
  The very highest UGPA and GMAT scores may be less
  predictive of success than high scores.

10

• But you can use a simple linear model that
  combines GPA and GMAT and have a model that has a
  high ability to select candidates who will be
  successful in grad school.

11

• The simplified model, which only considers a two
  of the variables we have discussed and assumes a
  linear relationship, can efficiently sort
  successful candidates even if all of the relevant
  measures arent included.

12

• An efficient model is not the same thing as an
  accurate model.
• There will be mistakesapplications will be
  rejected for people who would be successful
  graduate students, and applications will be
  accepted for people who will not be successful
  graduate students.

13

• BUTthe cost of improving the model so that it
  considers more variables, and the cost of using
  the more complex model, is thought to be less
  than the cost of errors caused by the imperfect
  model.

14

• What does this mean for accounting and our
  financial reporting model?

15
Disclosure

• Reg FD

16
Usefulness of Accounting Information

• What does it mean for accounting information to
  be useful?

17

• One component of usefulness is capable of
  making a difference
• One way of evaluating whether information makes a
  difference is to investigate the relation between
  publicly released accounting data and changes in
  a firms security prices.

18

• If there is a significant association, then there
  is evidence that accounting information is useful
  with respect to firm valuation.

19
Efficient Market Hypothesis

• What is the efficient market hypothesis?

20

• Market efficiency refers to the speed with which
  the market reacts to new information.
• The classic definition of market efficiency is
  that security prices reflect all available
  information. (Information is immediately
  impounded in security prices).

21

• Information has value if there is evidence of a
  price response to new information.

22
How compelling is the efficient market hypothesis?

• Most believe that at least some form of the
  efficient market hypothesis is supported.

23

• Why does the concept of market efficiency (with
  respect to information) have no necessary
  relation to the quality of accounting information?

24

• --Market efficiency refers only to the speed with
  which new information is incorporated into
  security prices. It says nothing about the
  quality of the information.

25

• If market efficiency is valid, there is no
  additional benefit to analysis of information as
  security prices reflect the information
  immediately.

26
Problems?

• Empirical studies are not powerful and may not be
  able to pick up subtle differences.
• It is difficult to isolate the variable of
  interest and to control all other variables!

27

• The research to date presents conflicting results
  with respect to market efficiency and the
  information content of accounting information.

28
Fundamental Analysis

• Assumes markets are INEFFICIENT and that
  underpriced shares can be identified through
  financial statement analysis.

29

• The market does respond to information about net
  income.
• Does it respond to balance sheet information and
  supplementary disclosure?
• Evidence of this is more difficult to find.

30

• Some studies suggest that the market may wait
  until certain balance sheet information is
  reflected in future earnings or cash flows before
  reacting.
• (Of course, if this is a result of improving
  decision rules, the stronger than expected
  results of those who use the information earlier,
  rather than later, should precipitate additional
  decision makers who follow this solution
  strategy)

31
Ou and Penman (1989)

• Studied financial ratios to determine if they
  could devise a strategy that beat the market
• It appeared, at least in their study, that this
  could be accomplished.

32

• Return on total assets
• gross margin ratio
• percentage of change in current assets as a
  predictor of future income
• 20 accounting measures
• 68 financial ratios
• approximately 23000 observations

33

• Investigated how well each ratio predicted the
  subsequent years net income
• Some did better than others.
• Took the 16 best predictors and developed a model
  and a solution strategy for investment decisions.
• And, over a multi-year investment protocol, they
  beat the market

34

• Were predictors capturing information that was
  not already reflected in security prices and thus
  would result in abnormal security returns if
  investment were based on the earnings prediction
  of their model?
• Apparently..(but returns may have been
  attributable to risk factors...)
• And results may have been specific to the time
  period studied, or to firm-specific variables
  such as size.

35

• Ou and Penman indicate that better accounting
  standards might improve the predictive ability of
  accounting information

36

• Over time and within years, the correlation
  between earnings numbers and stock returns has
  been exceedingly low. Earnings have very little
  explanatory power (as measured by R-SQ) relative
  to changes in stock prices
• Lev believes that one of the principal reasons
  for this situation lies with low quality of
  reported income numbers...

37
Baruch Lev

• Research on the quality of earnings shifts the
  focus to an explicit consideration of accounting
  issues by calling for a systematic examination of
  the extent to which the specific underlying
  accounting measurements and valuations, as well
  as managerial manipulations, detracts from the
  usefulness of earnings and other financial
  variables.

38

• Such research has the potential both to further
  our understanding of the role of financial
  information in asset valuation and to contribute
  meaningfully to accounting policy making.

39

• So Ou and Penman find a low explanatory
  relationship between earnings and stock returns,
  while Lev sees a predictive role for accounting
  data in a market that may be less efficient than
  previously thought. Lev is particularly
  concerned with improving accounting measurement,
  and one focus of his work is intangible asset
  valuation

40
Post Earnings Announcement Drift

• While markets do react immediately to earnings
  announcements, research seems to indicate that it
  can take up to 60 days for security prices to
  fully reflect the information in the earnings
  announcement.

41

• Abarbanell and Bushee found that financial
  analysts underreact to very fundamental signals,
  which leads to forecast errors, which lead to
  incomplete security price adjustments.
• Shareholders do not distinguish well between cash
  flow and accrual earnings measurements.

42

• Cost/benefit...would the cost of additional
  effort exceed the benefit from higher returns?

43
Efficient Markets? Fundamental Analysis?

• What do you think?

44
Different views of information

• Accounting as an historical record..
• implies feedback value, and the traditional role
  of accounting information to evaluate the
  stewardship function.

45

• Accounting as a mirror of economic income
• implies a proprietary theory with the focus on
  the change in wealth (in real terms) of the
  owners net income as a change in net asses

46

• Accounting as an information system
• seems to focus on the predictive nature of
  accounting information (similar to CON 1 and CON
  2)

47

• Commodity metaphor
• external investor who invests in information as
  well as in the firm itself.

48

• FASB seems to concentrate on accounting as an
  information system, although they also seem to be
  focusing on the measurement of economic wealth..

49
Economics of Financial Reporting Regulation

• Should Financial Reporting be regulated? Or will
  market forces lead to optimal information
  disclosure? (What are the penalties for
  inadequate or misleading disclosure? In what
  time frame are these penalties imposed? Who
  benefits or is hurt?)

50
Theories that encourage unregulated financial
information
51
Agency Theory

• Agency theory explains why incentives exist for
  voluntary reporting to owners.

52

• Management is an agent for the owner (stewardship
  function). Because the owner is not part of
  management, management has private information
  about the performance of the company. Owners and
  managers do not have perfectly correlated goals.

53

• Management wants to maximize compensation,
  performance evaluation, and job satisfaction
  owners want to maximize return on investment.

54

• Owners are motivated to contract with managers in
  such a way as to maximize the correlation between
  the goals of the two groups.
• Costs are incurred in monitoring the activities
  of management.
• Minimizing monitoring costs provides more
  resources for both management and for owners.

55

• Routine financial reporting is one means by which
  owners can monitor performance of management.
• The audit adds credibility to the financial
  reports.
• (The audit team should be hired by, and report
  to, owners...you even vote on the auditors at the
  annual meeting..and the role of the Board of
  Directors is receiving more attention)

56

• Do OWNERS really have much to do with contracts
  between the firm and management? What is the
  role of the Board of Directors? Does the Board
  really represent management, investors, both, or
  neither?

57
Signaling Theory

• Even if there were no mandatory reporting
  requirements, firms compete with one another for
  scare risk capital.
• Voluntary disclosure is a necessary component of
  competing for capital.
• (This may also be related to the supply of
  capital at any given time.)

58

• The ability of a firm to raise capital will be
  improved if the firm has a good reputation with
  respect to financial reporting.
• The cost of capital is likely to be lower if
  there is less uncertainty about the quality of
  financial reporting. More extensive, more
  reliable, financial reports lead to less risk and
  less risk leads to a lower required rate of
  return.

59

• Failure to report is often assumed to be bad
  information because there are incentives to
  report good information. IF no information is
  interpreted to be bad information, there are
  incentives to disclose the bad information to
  remove the uncertainty (and the risk).

60

• Do the demands for information vary with the
  sources of finance? I.e., creditors vs. lenders?

61
Private Contracting

• Anyone who wanted to obtain more information
  about a company could contract for it, directly
  or indirectly (i.e., through analysts).
• And this does happen...investor newsletters,
  investment advisors, commissions...

62

• The demand for information may be met when market
  forces determine the production and supply of
  accounting information. And this maybe an
  efficient method for disclosure.
• Who should bear the costs of information
  disclosure? How high are the costs? (What are
  the costs???)

63
Regulated Market for Information

• Are there incentives for regulation? To what
  extent should disclosure be mandated, and why?

64

• Possibility of a failure within the free market
  system market failure
• suboptimal allocation of resources
• Natural monopolies, such as utilities, are an
  example of market failures requiring regulatory
  intervention to prevent under supply and monopoly
  pricing

65

• Possibility that free markets are contrary to
  social goals.
• For example, it can be argued that free markets
  do no communicate enough information to the
  security markets resulting in managers and other
  insiders having information that is not available
  to shareholders (owners)

66

• Information in unregulated markets might not
  provide adequate comparability among firms.

67

• Differential access to information may create
  winners and losers in the market economy.
  Companies may have incentives to provide
  differential information to different user groups.

68
Regulation FD

• Reg FD took effect October 23, 2000.

69

• Regulation FD is the relatively new SEC rule that
  prohibits executives from feeding market-moving
  information to select individuals. A pet project
  of former SEC chairman Arthur Levitt, Reg FD was
  a response to his concern that executives would
  freely tip off analysts about the companys
  earnings prospects without disclosing the news
  publicly (WHY?)

70
Fans and Critics...

• Who do you suppose are the fans? The critics?

71

• The FD Effect The SECs new corporate
  disclosure rule has CFOs saying more and talking
  less. CFO Magazine, April 1, 2001.

72

• According to the CFO of the company, Diebold,
  Inc. is giving The Street more information than
  ever before. The company has disclosed
  additional performance data in its quarterly
  earnings releases and conference calls...

73

• The company has been providing explicit
  forward-looking guidance, spelling out management
  expectations in bullet points, providing an
  earnings range for the upcoming quarter and full
  year, and/or estimating a revenue growth rate

74

• The CFO notes that the company refuses to review
  analysts models, comment on estimates, or
  indicate whether the company is on track to meet
  its targets, except in a public forumLets
  guide The Street, rather than let the Street
  guide us.
• (Note The SEC, in implementation guidelines,
  states that reviewing analyst models does NOT
  violate FD...)

75

• FD has had the curious effect of making Diebold
  more open and more tightlipped at the same
  time...giving more information, but to different
  people (public disclosure) and at defined times
  (rather than when an analyst calls up...)

76

• CFO.com spoke with a dozen CFOs and IR officers
  and found they are responding to FD in similar
  ways.
• Theres no question that Reg FD has spurred
  companies to issue more press releases, file more
  8Ks, and increase Web-casting of earnings
  conference calls.

77

• CRITICS Skeptical about the quality of
  information. More transparency but less
  meaningful information. (Meaningful to whom?)
• Others blame FD for a record number of negative
  preannouncements of earnings.
• And some claim that FD adds to market volatility.
  (Is this good or bad?)

78

• (Are there incentives for preannouncements when
  we think about strike suits?)

79

• Analysts claim that companies are less
  forthcoming.

80

• Analysts are less likely to be told on the QT to
  shade their estimates companies must make the
  announcements public. Some claim that such
  surprises tend to make stocks move more
  dramatically.

81

• Reg FD has reshaped the disclosure landscape in
  ways that will likely be permanent regardless of
  changes in the regulations.

82
Guidance

• Finance chiefs and IR specialists have found FD
  to be strangely liberating.
• Before, analysts would ask us if we were
  comfortable with their range on earnings. Now we
  give them our range.

83
Private Meetings

• Still occur, but the attempt is made to not
  disclose new information (FD gives company 24
  hours to put out a public statement).

84
Preannouncements

• First Call, negative preannouncements were up 85
  in the 4th quarter of 2000. Weakening economy,
  or sudden unwillingness on the part of executives
  to walk The Street down to an earnings
  expectation that could be met? Or both?
• (Negative preannouncements are dependent in part
  on the current expectation of earnings based on
  current estimates by analysts.)

85

• Many companies that now give more explicit
  guidance on earnings also have a stated policy
  that they will issue a public disclosure as soon
  as that outlook changes. This may lead to more
  preannouncements.
• Management is more in control of the information
  flow rather than in a position of having to
  curry favor with analysts.

86
Information Updates

• Many companies are now using the Internet to
  provide broader and more frequent disclosures
  that go beyond earnings guidance and include key
  nonfinancial performance metrics.

87

• We are now releasing more timely and useful
  information so investors can build their models
  and make reasonable judgments about the company
  (CFO, Frontier Airlines)
• Similar statements from Chevron, Xilinx

88

• Expeditors International of Washington, Inc.
  Any questions about the company must be submitted
  in writing the written responses to inquiries
  about the quarterly results are available on the
  companys Web site within 48 hours, while answers
  to other business questions are posted on the
  first business day after the 15th of the month.

89

• Rather than give ad hoc responses in a
  conference call, we are able to do research and
  put out substantive answers to everybody at the
  same time, says Expeditors CFO Jordon Gates.

90

• In January, topics for questions submitted to
  Expiditors included derivatives accounting,
  competitive pressures, and the impact on the
  business of normalized trade relations with
  China. Our goal is not to be more talkative,
  but to provide more meaningful information.

91
Volatility

• NONE of the CFOs or IR directors we contacted
  attributed any volatility in their stocks to Reg
  FD.

92

• Critics insist that it has been a factor in
  recent market swings. Its creating
  considerably more volatility in share prices,
  because management cannot give guidance on
  earnings estimates as it did in the past.

93

• We dont have less access, but executives are
  much more cautious with the information they
  provide. James D. Parker, a growth -airline
  analyst at Raymond James and Associates in
  Atlanta.

94
Imperative to Communication

• For the most part, CFOs find it hard to dispute
  the notion of fairness thats at the heart of the
  new SEC rule. Talking the Street up or down was
  always unethical, says Ken Goldman, CFO of
  Siebel Systems.

95

• For many, it puts an enhanced premium on
  communication. Its in our best interest to be
  visible, says Thomas Ryan of Allied Waste
  Industries, Inc. Were driven by the premise
  that our securities will trade better if people
  have more information.

96
Thomson Financial survey

• What changes have you made due to Reg FD
• Instituted formal disclosure policy 23.2
• Provide more information in earnings release
  21.1
• No longer giving earnings guidance 21.1
• Web-cast conference calls 15.8

97

• Provide more information in conference calls 7.4
• Post more information on Web site 6.3
• Issue more press releases 5.3

98

• How has Reg FD affected your relationship with
  Buy-Side and Sell-Side Analysts?
• Limited flow of information 32.5
• More cautious in discussing models 22.5
• More focus on public documents 8.8
• No more one-on-one discussion 8.8

99

• More structured analyst meetings 7.5
• IR monitors all discussion with analysts 2.5

100

• Have you added information to your quarterly
  earnings releases, such as guidance?
• Yes 53.4
• No 46.4

101

• A look at Reg FD from the Corporate Side. David
  D. Miller, NymbleInvestor.com

102

• Gwen Rosenberg, VP of Corporate Communications,
  Alliance pharmaceutical (honored by Investor
  Relations Magazine for Best Communications with
  Retail Investors, 2000)

103

• Good IR people already understood the rules of
  uniform disclosure of material information.
  However, pressure from lazy or unscrupulous
  research analysts often forced companies to
  selectively disclose information in order to gain
  or retain coverage by major analyst firms. The
  fewer analysts a company had, the more pressure
  to play the game.

104

• In general, there is more caution when talking
  with the financial analysts.It has put a block
  between the company and the analysts because of
  the need to be more careful in the type of
  information we are giving.

105

• Companies are taking this to heart. They really
  want to make sure they are giving the same
  information and level of information to everyone.
  On one hand, there should be more information
  available to the general public.

106

• On the other hand, some companies are taking the
  route of giving less information to everyone. In
  a sense it is becoming a more even playing field,
  but whether that results in more information
  remains to be seen.

107
Opponents...

• The opponents of Reg FD were of the opinion many
  (most?) individual shareholders would not have
  the skill level or intelligence to interpret raw
  guidance from the company.

108

• Old scenario Companies were able to have
  detailed conversations with analysts with no real
  fear of disclosing material information
  inappropriately. In a perfect world, highly
  trained analysts would take this information and
  add it to their own original research to
  determine the companys prospects for success..

109

• They would then issue a research report
  explaining in laypersons terms the company, its
  products, and its prospects going forward.
  Ideally, this would be done objectively to best
  serve the analysts clients and the investing
  public

110

• The ideal scenario might exist in one firm out of
  200. Most analysts are rarely, if ever,
  objective. Those analysts who work with firms
  with investment banking operations bias their
  reports to the positive side in the hopes the
  company they are covering will choose their firm
  as investment bankers.

111

• Some analysts are really PR firms in disguise,
  charging the company directly for issuing a
  research report. Still other firms issue
  reports in the hopes they will affect the share
  price according to the position they previously
  accumulated in the subject companys stock.

112

• We have long believed IR professionals and
  especially research analysts far underestimate
  the intelligence and ability of the average
  independent investor. Sure, there are stupid
  investors out there, but weve met our fair share
  of stupid analysts, stupid institutional
  investors, and stupid management teams.

113
Earnings Guidance

• There is one area where disclosure seems to be
  uniformly more conservative Earnings guidance.
  The hypothesis is that company management wants
  to avoid a shareholder lawsuit at all costs.

114

• If a company does not meet an independent
  analysts forecasts, that isnt as important in
  the eyes of the court as if a company does not
  meet their OWN forecasts. It is our opinion that
  in order to avoid exposing themselves to strike
  suits, companies are lowballing earnings and
  revenue forecasts across the board.

115

• Press to CFOs Lighten up on Reg FD CFO.com,
  April 25, 2001, Jennifer Caplan

116

• The SEC sponsored forum on Reg FD. Participants
  included several members of the news media and
  some financial information providers who said
  that compliance with the rule could be a lot
  easier if CFOs and other corporate officials
  relied upon the press more often to distribute
  financial information.

117

• ALL SEVEN MEMBERS OF THE PRESS PANEL (Isana,
  CNBC, Norris NYT, Armon, PR Newswire) agreed that
  Reg FD has leveled the investment playing field.
  The panelists praised the regulations role in
  prompting companies to distribute material
  information via a wider range of channels.

118

• COO of Business Wire percentage of people
  listening to conference calls has increased 300
  in the last six months, and the number of
  Web-casts has risen by 54 in the same period.

119

• Members of the press stressed that Reg FD has
  made their jobs easier and improved the quality
  of their financial coverage. It has also forced
  securities analysts to improve the quality of
  their reports.

120

• Floyd Norris, New York Times Although analysts
  have been hurt by the rule in the short run, it
  is forcing them to spend more time evaluating
  company fundamentals and tracking market trends,
  and less schmoozing with CEOs and working on
  investment banking deals. The general feeling
  was that this trend has improved the quality of
  sell-side research coming from Wall Street.

121

• The impact of Reg FD transcends borders and will
  ripple across the globe as capital markets
  compete for investors confidence, (Best
  Calls.com Mark Coker).

122
The Political Arena

• Regulation FD has a lot of people howling, and as
  might be expected, the political process is
  kicking in...

123

• Laura Unger, former acting Chairman of the SEC
  (who held the post until Pitt was confirmed) was
  the single commissioner to vote AGAINST FD.

124

• CFO.com Reg FD under Congressional Scrutiny.
  May 16, 2001, Ed Zwirn

125

• Rep. Richard Baker and his Capital Markets
  subcommittee of the House Financial Services
  Committee will hear testimony from friends and
  foes of the rule.

126

• Its fundamental that the 200 investors be
  treated with the same care as the 2 million
  investor, and that a select few not be given
  unfair advantage over the many when it comes to
  crucial, market-sensitive information

127

• The practical question for our hearing, however,
  will be to gauge whether Reg FD actually
  accomplishes these goals or has instead had
  unintended consequences of reducing disclosure
  across the board.

128

• NYSSCPA. ORG
• April 25, 2001

129

• Though regulation fair disclosure has not greatly
  affected corporate American according to company
  executives participating in a Securities and
  Exchange Commission roundtable Tuesday, the
  Commission needs to provide better guidance on
  the law that became effective last October.

130

• The primary issue that needs clarification is
  materiality.

131
And the Business Press...
132

• Forbes, January 22, 2001 Foul Disclosures.
• Before you join the Reg FD bashers, consider the
  facts. Many Wall Street analysts, especially the
  highly paid superstars, have been so busy finding
  and promoting corporate finance deals that they
  spend little time on serious company analysis.

133

• Instead, they lamely rely on their good relations
  with corporate managements to feed them
  information. The analysts end up as shills for
  the companies they cover, doubly so when their
  firms have corporate finance relationships.

134

• Despite corporate guidance, Wall Street analysts
  were still bagged often. If analysts are already
  blind, how can Reg FD hurt them more?

135

• Business Week, January 8, 2001 News Analysis
  and Commentary. Commentary Give Fair Disclosure
  Time to Work. Investors will eventually learn
  not to panic at a little bad news.

136

• The quality of information is poorer and its
  coming out slower and that is going to make the
  market react more, argues Stuart J. Kaswell,
  general counsel of the Securities Industry
  Association.

137

• Critics are saying managements are delaying or
  withholding market-sensitive information they
  once readily shared with Wall Street and big
  stockholders.

138

• Moreover, theyre confusing the markets by
  packaging all the good and bad news at once in
  conference calls or in periodic releases, and
  theyre denying analysts private guidance once
  freely given on their quarterly earnings
  estimates, leading to lots of missed earnings
  targets.

139

• Admittedly, there are short term consequences.
  Since Reg FD was enacted, stocks have been apt to
  plunge as everyone grapples with troubling news
  at the same time . . in pre-fd days, such slides
  may have been more gradual, as those in the know
  quietly sold before the news got out.

140

• In the old regime, certain investors and
  brokerage houses would be able to get out of the
  stock at better prices, and the rest of the
  investing public would get robbed, argues
  Russell J. Lundholm, an accounting professor at
  the University of Michigans business school.

141

• Contrary to what critics allege, though, many
  companies are actually chattier than ever. Most
  now Webcast quarterly conference calls previously
  open only to analysts.

142

• June 30, 2004
• Siebel in Reg FD Trouble Again -- What Were They
  Thinking?
• http//www.bynoother.com/2004/06/siebel_in_reg_f.h
  tml

143

• January 21, 2005 Reg FD Unfair, Says Chamber of
  Commerce The business group maintains that ''in
  punishing companies for selectively disclosing
  'material and nonpublic' information, Regulation
  FD impairs fundamental First Amendment values.''
• http//www.cfo.com/article.cfm/3594674/c_3594684?f
  TodayInFinance_Inside

144

• Worst Fears Over Reg FD Unrealized
• By Jane Tisdale, CFA, Director of Product
  Engineering, U.S. Active Equity    
• On its fourth anniversary, the U.S. Security and
  Exchange Commissions Regulation Fair Disclosure
  (Reg FD) has not realized its critics worst
  fears of information shutdown or greater stock
  price volatility, but it has forced analysts to
  work harder for their insights. Supporters of Reg
  FD and other reforms to the analyst industry say
  investors will ultimately benefit from the
  changes through more thorough and unbiased
  research.
• http//www.ssga.com/library/povw/janetisdaleworstf
  earsover20041001/page.html

145

• Earnings Estimates Before and After Regulation FD
  
• Our research suggests that both the critics and
  supporters of Reg FD vastly overstated the
  initial impact of these new rules. In fact, Reg
  FD seems to have had little noticeable effect on
  the accuracy and dispersion of analyst earnings
  forecasts.

146

• Analyst earnings estimates still provide a useful
  guide for investors post-Reg FD. There has not
  been a significant decrease in forecast accuracy
  since the issuance of the new rules. In addition,
  recent consensus forecasts are dramatically
  better than the forecasts of ten and 15 years
  ago.
• http//www.ssga.com/library/resh/rthomasearningses
  timatesFD20040225/page.html

147

• Who Is Afraid of Reg FD? The Behavior and
  Performance of Supply-side analysts Following the
  SECs Fair Disclosure Rules, by Agrawal and
  Chadha, University of Alabama, Feb. 2004
• http//www.cba.ua.edu/pdf/WP04-10-03.pdf