Regulatory Oversight of Financial Reporting: Securities and Exchange Commission Comment Letters

• 成果类型: Article
• 署名作者: Johnston, Rick; Petacchi, Reining
• 署名单位: University of Alabama System; University of Alabama Birmingham; Georgetown University
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12297
• 发表日期: 2017
• 页码: 1128-1155
• 关键词: CORPORATE GOVERNANCE; information-content; INSTITUTIONAL OWNERSHIP; economic consequences; ACCOUNTING EARNINGS; MARKET; ENFORCEMENT; disclosure; DISCRETION; penalties

摘要

The Securities and Exchange Commission (SEC) reviews company filings (10-Q, 10-K, S-1, etc.) submitted to them. If a review identifies potential deficiencies, the SEC staff sends the company a comment letter seeking clarification, additional information, and ultimately, perhaps, revision of the filing or future filings. We examine the content, resolution, and ensuing informational consequences of SEC comment letters. The content analysis shows that nearly half of all comments involve accounting application, financial reporting, and disclosure issues. More than 17 percent of our sample cases result in immediate amended filings to resolve the issue(s) arising from the comment letters, and financial statements and/or footnotes are frequently revised. Following comment letter resolution, the adverse selection component of the bid-ask spread declines and Earnings Response Coefficients (ERCs) increase. Our results provide little support for the conjecture that the market interprets the receipt of a comment letter as a signal that the firm has poor reporting quality. Finally, we find no evidence that comment letter firms increase the quantity or change the type of voluntary disclosure, thereby eliminating a possible competing explanation for the improved information environment. We conclude the SEC's oversight has beneficial informational effects.