An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Bin Ke
Pennsylvania State University

Kathy Petroni
Michigan State University

Yong Yu
University of Texas at Austin

Abstract: We assess the impact of Reg FD on the trading behavior of transient institutional investors in the quarters prior to a break in a string of consecutive earnings increases. Pre Reg FD transient institutions have abnormal selling of stocks in the quarter prior to a bad news break (defined as a break that is longer, preceded by longer strings of consecutive earnings increases, associated with larger declines in earnings, and of growth firms). This abnormal selling is confined to firms that held either open or closed conference calls in the pre Reg FD period. However, after Reg FD transient institutions do not exhibit similar abnormal selling of stocks in the quarters prior to a bad news break. Furthermore, after Reg FD transient institutions allocate less of their stock portfolios to conference call firms relative to non-conference call firms in the quarters prior to the break. These results suggest that Reg FD has been effective in eliminating one type of management's selec

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