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<p>We introduce spatio-temporal entropy (STE) as a measure of stock price efficiency in accounting regulation research. We discuss the benefits of this measure, relative to the indirect proxies of the underlying construct that have been used by a host of prior studies. We apply the measure to a regulatory event that was designed to increase the informational efficiency of stock prices for U.S. companies: the Securities and Exchange Commission’s Regulation Fair Disclosure (Reg FD), enacted in October of 2000. We find that the STE% of stock prices declined (i.e. price efficiency declined) surrounding Reg FD. However, for the firms in the lowest deciles of STE% in the pre-Reg FD period, STE% rose sharply after the regulation. Similarly, for firms in the highest deciles of STE% in the pre-Reg FD period, STE% declined sharply. Thus Reg FD increased (decreased) the price efficiency for firms who had low (high) price efficiency pre-Reg FD. We examine how this effect is moderated by firm size, trading volume and on which stock exchange the firm is traded. Finally, we find that American Depositary Receipts (ADR), who were not subject to Reg FD, did not experience a significant change in STE%, controlling for variables that differed between them and our treatment firm sample.</p>

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Insights into the effects of regulation fair disclosure on stock price efficiency using Spatio-Temporal entropy

  • 期刊论文

  • 发表日期：

    2026年2月19日

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  • David A. Ziebart,
  • Yu-Ho Chi,
  • Jonathan Ross

摘要

We introduce spatio-temporal entropy (STE) as a measure of stock price efficiency in accounting regulation research. We discuss the benefits of this measure, relative to the indirect proxies of the underlying construct that have been used by a host of prior studies. We apply the measure to a regulatory event that was designed to increase the informational efficiency of stock prices for U.S. companies: the Securities and Exchange Commission’s Regulation Fair Disclosure (Reg FD), enacted in October of 2000. We find that the STE% of stock prices declined (i.e. price efficiency declined) surrounding Reg FD. However, for the firms in the lowest deciles of STE% in the pre-Reg FD period, STE% rose sharply after the regulation. Similarly, for firms in the highest deciles of STE% in the pre-Reg FD period, STE% declined sharply. Thus Reg FD increased (decreased) the price efficiency for firms who had low (high) price efficiency pre-Reg FD. We examine how this effect is moderated by firm size, trading volume and on which stock exchange the firm is traded. Finally, we find that American Depositary Receipts (ADR), who were not subject to Reg FD, did not experience a significant change in STE%, controlling for variables that differed between them and our treatment firm sample.