Regulator Continuity and Decision-Making Quality: Evidence from SEC Comment Letters

• 成果类型: Article
• 署名作者: Kubic, Matthew; Toynbee, Sara
• 署名单位: University of Texas System; University of Texas Austin
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2021-0432
• 发表日期: 2023
• 页码: 365-398
• 关键词: audit partner tenure; Securities law; disclosure; ENFORCEMENT; rotation; involvement; familiarity; expertise; earnings; outcomes

摘要

Staff at the U.S. Securities and Exchange Commission (SEC) conduct recurring reviews of firms' filings to deter misconduct and facilitate investor access to high-quality information. We identify the names of SEC staff who work on a comment letter and examine whether their prior involvement (i.e., continuity) is associated with comment letter quality. Our results are consistent with continuity leading to lower-quality comment letters. Continuity is associated with fewer substantive comments, agreed-upon disclosure changes, and greater similarity between consecutive comment letter reviews. These results are consistent with continuity increasing staffs' tendency to focus on familiar issues and overlook other areas of potential deficiencies. Time, changes in firms' operations, and increasing staffs' feelings of accountability can mitigate the negative effect of continuity on comment letter quality. Our study suggests benefits to a fresh perspective in regulatory monitoring.