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

Mark Bagnoli
Purdue Univeristy

Susan Watts
Purdue University

Yong Zhang
Hong Kong University of Science and Technology

Abstract: This paper examines the impact of Reg FD on the competitive advantage of All-Star analysts. We find that Institutional Investor All-Americans, chosen by the votes of institutional investors based on overall helpfulness, experienced a significant increase in turnover during the implementation and immediate aftermath of Reg FD, and that the change was concentrated in sectors most affected by Reg FD. We do not observe a similar change in the Institutional Investor buy-side rankings of non-U.S. analysts or in the Wall Street Journal’s Best on the Street rankings which are based solely on returns from the analyst’s stock recommendations. By 2003, the competitive environment for All-Americans had stabilized, with turnover returning to pre-Reg-FD levels. Thus, within a few years, All-Americans had built a new competitive advantage stressing aspects of performance less dependent on privileged communications.

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