The indirect economic penalties in SEC investigations of underwriters

• 成果类型: Article
• 署名作者: Beatty, RP; Bunsis, H; Hand, JRM
• 署名单位: Southern Methodist University; University of North Carolina; University of North Carolina Chapel Hill
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(98)00035-X
• 发表日期: 1998
• 页码: 151-186
• 关键词: underwriter reputation; SEC investigations; indirect penalties; optimal regulation

摘要

We document that an SEC investigation of an underwriter imposes indirect penalties on the underwriter and its past clients, particularly IPO clients. Targeted underwriters experience large declines in IPO market share and increased regulatory scrutiny and client risk after an SEC investigation is announced. Stock prices of clients decline significantly. We attribute these effects to a sudden deterioration in the value of the underwriter's reputation capital, suggesting that the general assumption in prior IPO research that underwriter reputation is stationary may be inappropriate. Our results also suggest that the SEC's power to institute investigations should be considered when designing optimal securities regulation. (C) 1998 Elsevier Science S.A. All rights reserved.