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Partisan bias in securities enforcement

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  • Reilly S Steel

Abstract

In this article, I present a partisan theory of agency enforcement and empirically investigate the possibility of partisan bias in the enforcement of the federal securities laws. Leveraging plausibly exogenous shocks to partisan control of the U.S. Securities and Exchange Commission (SEC), I find evidence that a firm’s partisan alignment with the SEC substantially reduces the likelihood of enforcement. For a firm that is ex ante equally likely to be targeted for enforcement or not, my estimates indicate that a typical increase in partisan alignment following a change in party control of the SEC reduces the likelihood of enforcement by over 19%. Partisan alignment also appears to reduce aggregate monetary sanctions, though these estimates are less certain. By contrast, I find little evidence of partisan bias in the initial opening of investigations. These findings suggest there may be meaningful partisan bias in SEC enforcement and have important implications for democratic governance. (JEL D73, K22, K23, K41, K42, P00)

Suggested Citation

  • Reilly S Steel, 2026. "Partisan bias in securities enforcement," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 42(1), pages 34-60.
    • Handle: RePEc:oup:jleorg:v:42:y:2026:i:1:p:34-60.
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    File URL: http://hdl.handle.net/10.1093/jleo/ewae019
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    More about this item

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • P00 - Political Economy and Comparative Economic Systems - - General - - - General

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