Regulation Fair Disclosure (“Reg-FD”) was intended to stop the practice of selective disclosure, in which companies provided material information to select analysts and institutional investors prior to public disclosure. It achieved this goal by requiring that material disclosures be broadly disseminated to the public through non-exclusionary channels. While the underlying concept of broad non-exclusionary disclosures is simple, the legislative implementation of this regulation generated significant controversy. In particular, a number of stakeholders believed that the difficulty associated with identifying material disclosures and broad non-exclusionary methods of dissemination would discourage firms from providing informal communications that could potentially violate Reg-FD, thus leading to a deterioration in the overall level of disclosure. While a number of prior studies have documented that Reg-FD has eliminated certain selective disclosures, it remains unclear how Reg-FD affects the firm’s overall disclosure policy and information environment.

In our paper, we contribute to our understanding of how Reg-FD may have influenced firms’ overall disclosure policy by examining one specific aspect—the adoption of new disclosure technologies. More specifically, we provide insights as to whether firms are reluctant to adopt new disclosure technologies without clear guidance from the SEC endorsing their use for the purposes of complying with Reg-FD. We focus on Twitter because prior studies have established that there are positive capital market benefits to Twitter usage, suggesting that Twitter would be broadly adopted if there were limited costs to doing so. In addition, firms do not have to use Twitter to disseminate information provided through traditional channels, which allows us to isolate the voluntary adoption of Twitter as a new disclosure medium.

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