Information Leakage Around SEC Comment Letters

• 成果类型: Article
• 署名作者: Geiger, Marshall A.; Johnson, Bret; Jones, Keith L.; Kumas, Abdullah
• 署名单位: University of Richmond; George Mason University; University of Kansas
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2021.4259
• 发表日期: 2022
• 页码: 8449-8463
• 关键词: Sec comment letters; Information leakage; Mutual funds

摘要

We investigate whether sophisticated investors obtain information about Securities and Exchange Commission (SEC) comment letters before the public release date. Specifically, we examine mutual fund trading behavior around dates firms receive a comment letter. We find significant abnormal net selling by mutual funds immediately after a firm receives a comment letter. Additional tests find that abnormal net selling is greater when firms receive a second-round letter, where information leakage is more likely (e.g., firms with high board member connectedness and higher dedicated institutional ownership) and when comment letters address more critical issues (e.g., the need to restate prior results or related party transactions). We also find that funds with high abnormal net selling in the private phase avoid significant future share price declines. In sum, we find consistent evidence that mutual funds appear to trade on information obtained during the private phase of the SEC comment letter process.