Disclosure Speed: Evidence from Nonpublic SEC Investigations

Blackburne, Terrence; Quinn, Phillip J.

doi:10.2308/tar-2019-0407

Cited by 22 publications

(11 citation statements)

References 86 publications

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“…Bernile et al (2015) find that firms subjected to SEC/Department of Justice (DOJ) investigations or shareholder lawsuits have larger and more persistently negative preexposure trading imbalances. Disclosure speed may also have an impact on SEC investigations (Field et al, 2005;Blackburne and Quinn, 2020).…”

Section: Sec Investigationsmentioning

confidence: 99%

Employee treatment and Securities Exchange Commission investigations

Brodmann

Unsal

2023

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PurposeThe authors examine the impact of employee litigation on Securities Action Lawsuits. The authors study whether frequently sued firms are more likely to be investigated by Securities Exchange Commission (SEC). The authors study how labor relations are crucial to corporate governance.Design/methodology/approachThe authors use hand-collected datasets of employee violations, misconducts and lawsuits and test whether bad employee treatment increases the likelihood of SEC probe. The authors' methodology includes panel fixed effects, as well as alternative measures of employee mistreatment and SEC case.FindingsThe authors find that with each increase in employee dispute increases the likelihood of the firm being investigated by the SEC. The authors find that geographically dispersed firms are more likely to be investigated by the SEC when facing employee disputes and that more labor union coverage and a higher unemployment rate triggers more employee allegations and labor-related lawsuits.Originality/valueThe authors' study is the first to investigate how employee relations affect firms involving federal investigation. The authors aim to contribute to the literature by studying (i) the relation between employee mistreatment and legal challenges, (ii) how firm characteristics affect the path from employee disputes to securities class actions and (iii) the impact of employee mistreatment on the corporate governance.

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Section: Sec Investigationsmentioning

confidence: 99%

Employee treatment and Securities Exchange Commission investigations

Brodmann

Unsal

2023

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“…Specifically, as key executives may update their beliefs about the likelihood that potential wrongdoing is detected, they may modify their actions once they are made aware of an SEC regulatory inquiry [3]. For example, prior literature documents that SEC investigations are associated with a substantial decline in future firm performance and severe insider trading [4], increased analyst coverage, an increased likelihood of appointing a large auditor, high litigation risk [5], decreased capital expenditures, and increased likelihoods of CEO turnover, earnings restatements, and class action lawsuits [3]. Although the SEC currently does not regulate CSR activities, failures related to the environmental, social, and governance (ESG) reporting and performance are investigated by the SEC and/or external auditors.…”

Section: Introductionmentioning

confidence: 99%

“…To our knowledge, however, prior research has paid little attention to this question. To provide systematic evidence of the direction of this effect, we follow Blackburne et al (2021a, 2021b; Blackburne and Quinn, 2023) [3][4][5] and utilize their novel dataset of all the SEC's Division of Enforcement investigations. This dataset covers investigations during the period between 2000 and 2017 and contains the opening and closing dates of the SEC investigations.…”

Section: Introductionmentioning

confidence: 99%

The Effect of the Security and Exchange Commission’s Investigations into Corporate Social Responsibility Performance

Hrazdil,

Kim,

2023

Sustainability

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We examine the effect of the Security and Exchange Commission’s (SEC) investigations into firms’ corporate social responsibility (CSR) performance. Adopting a staggered event study setting and analyzing all public and private SEC investigations into possible violations of federal securities laws, we find that firms reduce their investment in ESG-related activities and experience significantly lower CSR performance while being investigated by the SEC. This baseline finding is more pronounced among firms that appoint a large auditor or force their CEO to resign. To address concerns about potential endogeneity, we also conduct a multiperiod dynamic analysis and estimate our baseline regressions using the propensity-score-matched sample. Our results further reveal that the negative effect of SEC investigations on CSR performance manifests in CSR activities related to corporate governance and firms’ products. Overall, we highlight some unintended consequences of SEC investigations.

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“…Early studies infer managers' private information during the quarter based on quarter-end realizations, patterns of stock returns upon eventual disclosure, strategic timing of disclosure around other events, or other assumptions about the amount and timing of information (e.g., Skinner 1994;Kasznik and Lev 1995;Aboody and Kasznik 2000;Kothari, Shu, and Wysocki 2009;Roychowdhury and Sletten 2012). Several recent papers propose two more-precise proxies for managers' private negative information: the dates when firms were first informed of an SEC investigation, and residual short interest (Bao et al 2019;Blackburne and Quinn 2020;Blackburne et al 2021). Our approach builds on these studies by capturing positive as well as negative private information about revenues, a topic central to firm performance and common across many firms.…”

Section: Introductionmentioning

confidence: 99%

Real-time revenue and firm disclosure

et al. 2022

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We examine firm disclosure choice when information is received on a real-time, continuous basis. We use transaction-level credit and debit card sales for a sample of retail firms to construct a weekly measure of abnormal revenue for each firm. We validate the informativeness of this abnormal real-time revenue information, confirming its positive correlation with abnormal returns, unexpected revenue realizations, and management revenue forecast news. Using revenue forecasts, we find that firms are less likely to disclose abnormally negative news early in the quarter. As the quarter progresses, firms reduce their withholding of negative news. These results are consistent with impending earnings announcements disciplining managers to provide negative news. This pattern of initial withholding and then disclosure exists primarily in firms with high analyst coverage, high institutional ownership, or high litigation risk. Finally, we find increased insider stock sales in weeks with abnormally negative news and no firm disclosure. Overall, our study provides evidence of the informativeness of real-time information and manager discretion in its release.

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Disclosure Speed: Evidence from Nonpublic SEC Investigations

Cited by 22 publications

References 86 publications

Employee treatment and Securities Exchange Commission investigations

Employee treatment and Securities Exchange Commission investigations

The Effect of the Security and Exchange Commission’s Investigations into Corporate Social Responsibility Performance

Real-time revenue and firm disclosure

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