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SEC enforcement: Does forthright disclosure and cooperation really matter?

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  • Files, Rebecca

Abstract

This study examines the conditions under which the Securities and Exchange Commission (SEC) exercises enforcement leniency following a restatement. I explore whether cooperation with SEC staff and forthright disclosure of a restatement (e.g., disclosures reported in a timely and visible manner) reduce the likelihood of an SEC sanction or SEC monetary penalties. After controlling for restatement severity, I find that cooperation increases the likelihood of being sanctioned, perhaps because it improves the SEC's ability to build a successful case against the firm. However, cooperation and forthright disclosures are rewarded by the SEC through lower monetary penalties.

Suggested Citation

  • Files, Rebecca, 2012. "SEC enforcement: Does forthright disclosure and cooperation really matter?," Journal of Accounting and Economics, Elsevier, vol. 53(1), pages 353-374.
    • Handle: RePEc:eee:jaecon:v:53:y:2012:i:1:p:353-374
    DOI: 10.1016/j.jacceco.2011.06.006
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    11. David H. Solomon & Eugene Soltes, 2021. "Is “Not Guilty” the Same as “Innocent”? Evidence from SEC Financial Fraud Investigations," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 18(2), pages 287-327, June.
    12. Dasgupta, Sudipto & Banerjee, Shantanu & SHI, RUI & Yan, Jiali, 2021. "Information Complementarities and the Dynamics of Transparency Shock Spillovers," CEPR Discussion Papers 15658, C.E.P.R. Discussion Papers.
    13. Nerissa C. Brown & Richard M. Crowley & W. Brooke Elliott, 2020. "What Are You Saying? Using topic to Detect Financial Misreporting," Journal of Accounting Research, Wiley Blackwell, vol. 58(1), pages 237-291, March.
    14. Cipriano, Michael & Hamilton, Erin L. & Vandervelde, Scott D., 2017. "Has the lack of use of the qualified audit opinion turned it into the “Rotten Kid” threat?," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 47(C), pages 26-38.
    15. Nurunnabi, Mohammad, 2014. "‘Does accounting regulation matter?’: An experience of international financial reporting standards implementation in an emerging country," Research in Accounting Regulation, Elsevier, vol. 26(2), pages 230-238.
    16. deHaan, Ed & Kedia, Simi & Koh, Kevin & Rajgopal, Shivaram, 2015. "The revolving door and the SEC’s enforcement outcomes: Initial evidence from civil litigation," Journal of Accounting and Economics, Elsevier, vol. 60(2), pages 65-96.
    17. Ormazabal, Gaizka, 2018. "The Role of Stakeholders in Corporate Governance: A View from Accounting Research," CEPR Discussion Papers 12775, C.E.P.R. Discussion Papers.
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    23. Duong Nguyen & Tribhuvan Puri, 2014. "Information asymmetry and accounting restatement: NYSE-AMEX and NASDAQ evidence," Review of Quantitative Finance and Accounting, Springer, vol. 43(2), pages 211-244, August.

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    More about this item

    Keywords

    SEC enforcement actions; AAERs; Accounting restatements; Cooperation; Voluntary disclosure;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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