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Political connections and SEC enforcement

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  • Correia, Maria M.

Abstract

In this study, I examine whether firms and executives with long-term political connections through contributions and lobbying incur lower costs from the enforcement actions by the Securities and Exchange Commission (SEC). I find that politically connected firms on average are less likely to be involved in SEC enforcement actions and face lower penalties if they are prosecuted by the SEC. Contributions to politicians in a strong position to put pressure on the SEC are more effective than others at reducing the probability of enforcement and penalties imposed by an enforcement action. Moreover, the amounts paid to lobbyists with prior employment links to the SEC, and the amounts spent on lobbying the SEC directly, are more effective than other lobbying expenditures at reducing enforcement costs faced by firms.

Suggested Citation

  • Correia, Maria M., 2014. "Political connections and SEC enforcement," Journal of Accounting and Economics, Elsevier, vol. 57(2), pages 241-262.
  • Handle: RePEc:eee:jaecon:v:57:y:2014:i:2:p:241-262
    DOI: 10.1016/j.jacceco.2014.04.004
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    More about this item

    Keywords

    Political connections; Securities and Exchange Commission; Prosecution; Enforcement; Legal penalties;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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