Brady J. Twedt

How Companies Distract Investors When Disclosing Bad News

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SEC regulations require public firms to disclose any “material event” on a form 8-K filed within a certain time period. These events include earnings announcements, changes in an executive or director, changes in auditor and the issuance of new debt or equity. The news can be good or bad, and firms often issue press releases explaining the event.

We examine whether firms forced to disclose bad news issue press releases touting unrelated news around the time of the filing to distract investors. We study a broad sample of thousands of 8-K filings that are accompanied by press releases and find … Read more

Did Regulation FD Prevent Selective Disclosure?

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The Securities and Exchange Commission proposed Regulation Fair Disclosure (Reg FD) on December 20, 1999. The motivation behind the proposal was concern that an informational advantage provided by selective disclosures to certain market participants was resulting in a loss of confidence in the integrity of capital markets. Thus, the SEC’s stated intention with Reg FD was to “level the playing field” for all market participants.

The proposal was met with a strong reaction by market participants, with over 6,000 comment letters issued in response, and the reaction was mixed. On the one hand, individual investors generally supported the proposal, expressing … Read more