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

See all articles by Anna Agapova

Anna Agapova

Florida Atlantic University

Jeff Madura

Florida Atlantic University - College of Business

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

Agapova, Anna and Madura, Jeff, Information Leakage Prior to Company Issued Guidance (April 18, 2011). Financial Management, Vol. 40, No. 3, pp. 623-646, Fall 2011, Available at SSRN: https://ssrn.com/abstract=1814195

Anna Agapova (Contact Author)

Florida Atlantic University ( email )

Finance Department
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Boca Raton, FL 33431
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561-297-3493 (Phone)

Jeff Madura

Florida Atlantic University - College of Business ( email )

University Tower
220 SE 2 Avenue
Fort Lauderdale, FL 33301
United States
(954)762-5632 (Phone)
(954)762-5245 (Fax)

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