Information Leakage Prior to Company Issued Guidance
Financial Management, Vol. 40, No. 3, pp. 623-646, Fall 2011
43 Pages Posted: 19 Apr 2011 Last revised: 20 Oct 2011
Date Written: April 18, 2011
Abstract
We find that information leakages prior to public guidance issued by company management exist even after Regulation FD, and are more pronounced when characteristics of the firm, the guidance, or the industry reflect higher levels of information asymmetry. Since public guidance is only partially leaked, this information leakage can be used to anticipate the information content of the impending public guidance. We simulate a trading strategy based on the pre-guidance leakage in the period after Regulation FD, which suggests that information leakage is an effective signal of the information content within impending public guidance.
Keywords: Information leakage, Management guidance
JEL Classification: G14
Suggested Citation: Suggested Citation
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