Publications
Publications
- September 2019
- Review of Accounting Studies
The Effect of Enforcement Transparency: Evidence from SEC Comment-Letter Reviews
By: Miguel Duro, Jonas Heese and Gaizka Ormazabal
Abstract
This paper studies the effect of the public disclosure of the Securities and Exchange Commission (SEC) comment-letter reviews (CLs) on firms’ financial reporting. We exploit a major change in the SEC’s disclosure policy: in 2004, the SEC decided to make its CLs publicly available. Using a novel dataset of CLs, we analyze the capital-market responses to firms’ quarterly earnings releases following CLs conducted before and after the policy change. We find that these responses increase significantly after the policy change. These stronger responses partly occur while the review is still ongoing and persist on average for two years. Corroborating these results, we also document a set of changes that firms make to their accounting reports following CLs. Our results indicate that disclosure of regulatory oversight activities can strengthen public enforcement.
Keywords
Disclosure; SEC Comment-Letter Reviews; Public Enforcement; Governance; Information Publishing; Policy; Financial Reporting; Capital Markets; Organizational Change and Adaptation
Citation
Duro, Miguel, Jonas Heese, and Gaizka Ormazabal. "The Effect of Enforcement Transparency: Evidence from SEC Comment-Letter Reviews." Review of Accounting Studies 24, no. 3 (September 2019): 780–823.
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