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Public Enforcement of Securities Market Rules: Resource-based evidence from the Securities Exchange Commission

Author

Listed:
  • Lohse, Tim

    (Berlin School of Economics and Law, & Max Planck Institute for Tax Law and Public Finance,)

  • Pascalau, Razvan

    (Department of Economics and Finance,)

  • Thomann, Christian

    (Royal Institute of Technology (KTH), Centre of Excellence for Science and Innovation Studies (CESIS), Ministry of Finance, & Leibniz University of Hannover)

Abstract

We empirically investigate whether increases in the U.S. Securities and Exchange Commission’s (SEC) budget have an effect on firms’ compliance behavior with securities market rules. Our study uses a dataset on the SEC’s resources and its enforcement actions over a period beginning shortly after the Second World War and ending in 2010. We find that increases in the SEC’s resources both improve compliance and lead to an increased activity level of the SEC. The higher level of compliance is reflected by a decrease in the numbers of enforcement cases. The increased activity level is reflected by a surge in the number of inves-tigations conducted by the SEC.

Suggested Citation

  • Lohse, Tim & Pascalau, Razvan & Thomann, Christian, 2014. "Public Enforcement of Securities Market Rules: Resource-based evidence from the Securities Exchange Commission," Working Paper Series in Economics and Institutions of Innovation 364, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  • Handle: RePEc:hhs:cesisp:0364
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    File URL: https://static.sys.kth.se/itm/wp/cesis/cesiswp364.pdf
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    References listed on IDEAS

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    Cited by:

    1. Abdul‐Rahman Khokhar & Hesam Shahriari, 2022. "Is the SEC captured? Evidence from political connectedness and SEC enforcement actions," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(2), pages 2725-2756, June.
    2. Tim Lohse & Christian Thomann, 2015. "Are bad times good news for the Securities and Exchange Commission?," European Journal of Law and Economics, Springer, vol. 40(1), pages 33-47, August.
    3. Thomann Christian, 2014. "Recent developments in Corporate Taxation in Sweden," Nordic Tax Journal, Sciendo, vol. 2014(2), pages 195-214, November.
    4. Licht, Amir N. & Poliquin, Christopher & Siegel, Jordan I. & Li, Xi, 2018. "What makes the bonding stick? A natural experiment testing the legal bonding hypothesis," Journal of Financial Economics, Elsevier, vol. 129(2), pages 329-356.

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    More about this item

    Keywords

    Public enforcement; securities laws; compliance; Securities and Exchange Com-mission; budget;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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