The Cost of Investor Protection: Bank Loan Contracting During SEC Investigations

• 成果类型: Article; Early Access
• 署名作者: Chen, Yangyang; Ofosu, Emmanuel; Pittman, Jeffrey
• 署名单位: City University of Hong Kong; Lingnan University; Memorial University Newfoundland; Virginia Polytechnic Institute & State University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2024-0405
• 发表日期: 2025
• 关键词: internal control weakness; private information; accounting standards; determinants; ENFORCEMENT; RENEGOTIATION; monopolies; disclosure; liquidity; QUALITY

摘要

In examining the loan contracting implications of SEC investigations, we document that banks charge higher loan spreads when borrowers are under investigation, with the rise in interest rates varying predictably with lender characteristics. Further, our evidence implies that the debt pricing impact of SEC investigations is amplified for borrowers suffering worse credit quality and information asymmetry as well as those relying more on bank loans. These findings suggest that banks perceive increased risk for borrowers under SEC scrutiny while also leveraging their knowledge of the investigations to extract rents. Supplemental analyses reveal tighter nonspread loan terms and a higher likelihood of amending existing loan contracts during SEC investigations. Additionally, the tightening of loan terms reverses for investigations that conclude without enforcement actions. Overall, our research identifies an economic cost of SEC investigations and alerts regulators to these costs when deciding whether to launch an investigation.