International Journal of Business, Management and Commerce (IJBMC)

This paper provides the evidence on the impact of Regulation Fair Disclosure (RFD) on analysts’ forecasts bias on sin stocks. I measure analyst forecast bias as the difference between the consensus earnings forecast and the actual earnings, scaled by the stock price. I find a positive association between the level of forecast optimism and sin firm membership, in the Post-RFD period, and no significant association in the Pre-RFD period. Regulation FD increases sin firms’ optimistic forecast bias. These results imply that analysts tend to issue over-optimistic earnings forecasts on sin stocks in the Post-RFD period, but not in Pre-RFD period. Regulation FD may deteriorate information environment of sin firms.