When are firms on the hot seat? An analysis of SEC investigation preferences

• 成果类型: Article
• 署名作者: Holzman, Eric R.; Marshall, Nathan T.; Schmidt, Brent A.
• 署名单位: Indiana University System; Indiana University Bloomington; University of Colorado System; University of Colorado Boulder; Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2023.101610
• 发表日期: 2024
• 关键词: earnings; cost

摘要

Little is known about how the SEC selects its targets for investigation. We study this subject using a new database of formal SEC investigations. We predict and find that case selection is associated with a firm's (i) likelihood of regulatory noncompliance, (ii) exposure to private sector scrutiny, and (iii) conspicuous public trigger events. The relationship between investigations and regulatory noncompliance and private sector scrutiny preferences is sensitive to SEC constraints, whereas the relationship with triggers is not. We also examine the association between investigation motives and enforcement actions, an important SEC outcome reported to Congress. While regulatory noncompliance -motivated and public trigger -motivated investigations are more likely to result in public charges, specifically when the SEC is constrained, private sector scrutiny -motivated investigations are less likely to result in public charges. Finally, investigation rates of potential targets are associated with the career trajectories of SEC personnel, while investigation outcomes are not. (c) 2023 Elsevier B.V. All rights reserved.