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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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    7. 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.
    8. 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.
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    10. Leone, Andrew J. & Li, Edward Xuejun & Liu, Michelle, 2021. "On the SEC's 2010 enforcement cooperation program," Journal of Accounting and Economics, Elsevier, vol. 71(1).
    11. Laure Batz, 2023. "Financial market enforcement in France," European Journal of Law and Economics, Springer, vol. 55(3), pages 409-468, June.
    12. Andrew C. Call & Gerald S. Martin & Nathan Y. Sharp & Jaron H. Wilde, 2018. "Whistleblowers and Outcomes of Financial Misrepresentation Enforcement Actions," Journal of Accounting Research, Wiley Blackwell, vol. 56(1), pages 123-171, March.
    13. 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.
    14. Vivian W. Fang & Allen H. Huang & Wenyu Wang, 2017. "Imperfect Accounting and Reporting Bias," Journal of Accounting Research, Wiley Blackwell, vol. 55(4), pages 919-962, September.
    15. Chiu, Peng-Chia & Teoh, Siew Hong & Zhang, Yinglei & Huang, Xuan, 2023. "Using Google searches of firm products to detect revenue management," Accounting, Organizations and Society, Elsevier, vol. 109(C).
    16. Nurunnabi, Mohammad, 2015. "The impact of cultural factors on the implementation of global accounting standards (IFRS) in a developing country," Advances in accounting, Elsevier, vol. 31(1), pages 136-149.
    17. Mehta, Mihir N. & Zhao, Wanli, 2020. "Politician Careers and SEC enforcement against financial misconduct," Journal of Accounting and Economics, Elsevier, vol. 69(2).
    18. Nurunnabi, Mohammad, 2014. "The role of the Securities and Exchange Commission in a developing economy: Implications for IFRS," Advances in accounting, Elsevier, vol. 30(2), pages 413-424.
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    25. 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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