The Impact of Disclosure Reform on the NZX's Financial Information Environment

Abstract

This study investigates the impact of amendments to the New Zealand Exchange's listing rules and the Securities Markets Act 1988 enacted in December 2002. These reforms provided statutory backing for a continuous disclosure listing rule requiring companies to immediately release all price-sensitive information to investors. We follow the methodology employed by Helfin et al. (2003) to test the impact of Regulation FD in the US. Our results show that under New Zealand's continuous disclosure regime analysts' earnings forecast errors did not decline but that analysts' forecasts showed less dispersion in the post-reform period. In respect of informational efficiency we find a smaller abnormal return around the annual earnings announcement date in the post-reform period for small companies. Our results suggest that the reforms have improved the flow of information to investors consistent with the intent of the reform.