The effect of enforcement transparency: Evidence from SEC comment-letter reviews

• 成果类型: Article
• 署名作者: Duro, Miguel; Heese, Jonas; Ormazabal, Gaizka
• 署名单位: University of Navarra; IESE Business School; Harvard University; Center for Economic & Policy Research (CEPR)
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-019-09503-1
• 发表日期: 2019
• 页码: 780-823
• 关键词: institutional investors; earnings announcements; information-content; disclosure; QUALITY; MARKET; GAAP; determinants; management; CHOICE

摘要

This paper studies the effect of the public disclosure of the Securities and Exchange Commission (SEC) comment-letter reviews (CLs) on firms' financial reporting. We exploit a major change in the SEC's disclosure policy: in 2004, the SEC decided to make its CLs publicly available. Using a novel dataset of CLs, we analyze the capital-market responses to firms' quarterly earnings releases following CLs conducted before and after the policy change. We find that these responses increase significantly after the policy change. These stronger responses partly occur while the review is ongoing and persist on average for two years. Corroborating these results, we also document a set of changes that firms make to their accounting reports following CLs. Our results indicate that disclosure of regulatory oversight activities can strengthen public enforcement.