Do the SEC’s Enforcement Preferences Affect Corporate Misconduct?

Kedia, Simi; Rajgopal, Shivaram

doi:10.2139/ssrn.1364967

Cited by 140 publications

(224 citation statements)

References 28 publications

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“…Kwan and Kwan (2011) for example investigate the effect of public reprimand on share price, confirming prior findings by Chen, Firth, Gao and Rui (2005). Prior studies also identify factors such as visibility of the company (Kedia & Rajgopal 2011), ownership structure (Chen, Jiang, Liang & Wang 2011) as well as restatement (Files 2012) are related to public reprimand. Board of directors plays important role in ensuring that company is operating within the rules and regulations stipulated by authority.…”

Section: Introductionsupporting

confidence: 59%

Corporate Governance and Public Reprimand

Embong

Radzi²

2017

AJAG

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Section: Introductionsupporting

confidence: 59%

Corporate Governance and Public Reprimand

Embong

Radzi²

2017

AJAG

View full text Add to dashboard Cite

show abstract

“…Finally, Panel E reports the number of auditor offices with and without audit failures located in each of the SEC's 11 regional offices/districts. Kedia and Rajgopal (2011) find that geography is important in explaining corporate misreporting and SEC enforcement activity. A Kolmogorov-Smirnov test indicates that the distribution of auditor offices with failures versus offices without audit failures is significantly different (p , 0.01) across the 11 SEC regions.…”

Section: Office-level Audit Failuresmentioning

confidence: 84%

“…11 As in prior research, we include year and industry fixed effects. In addition, SEC regional office fixed effects are used to control for geographic patterns in misreporting and detection by the SEC (Kedia and Rajgopal 2011).…”

Section: Empirical Modelmentioning

confidence: 99%

The Contagion Effect of Low-Quality Audits

Francis

Michas

2012

The Accounting Review

258

103

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We investigate if the existence of low-quality audits in an auditor office indicates the presence of a ''contagion effect'' on the quality of other (concurrent) audits conducted by the office. A low-quality audit is defined as the presence of one or more clients with overstated earnings that were subsequently corrected by a downward restatement. We document that the quality of audited earnings (abnormal accruals) is lower for clients in these office-years (when the misreporting occurred) compared to a control sample of officeyears with no restatements. This effect lasts for up to five subsequent years, indicating that audit firms do not immediately rectify the problems that caused contagion. We also find that an office-year with client misreporting is likely to have subsequent (new) client restatements over the next five fiscal years. Overall, the evidence suggests that certain auditor offices have systematic audit-quality problems and that these problems persist over time.

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“…They document that the average (median) market capitalization for SEC 8 There is limited research on the role of SEC enforcement on improving accounting quality in companies. One notable exception is Kedia and Rajgopal (2011). They find that firms located closer to SEC offices and in areas with higher prior SEC enforcement activity are less likely to restate their financials.…”

Section: Role Of Sec Enforcementmentioning

confidence: 99%

SOX after Ten Years: A Multidisciplinary Review

Coates

Srinivasan

2014

Accounting Horizons

194

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We review and assess research findings from 120+ papers in accounting, finance, and law to evaluate the impact of the Sarbanes-Oxley Act. We describe significant developments in how the Act was implemented and find that despite severe criticism, the Act and institutions it created have survived almost intact since enactment. We report survey findings from informed parties that suggest that the Act has produced financial reporting benefits. While the direct costs of the Act were substantial and fell disproportionately on smaller companies, costs have fallen over time and in response to changes in its implementation. Research about indirect costs such as loss of risk taking in the U.S. is inconclusive. The evidence for and social welfare implications of claimed effects such as fewer IPOs or loss of foreign listings are unclear. Financial reporting quality appears to have gone up after SOX but research on causal attribution is weak. On balance, research on the Act's net social welfare remains inconclusive. We end by outlining challenges facing research in this area, and propose an agenda for better modeling costs and benefits of financial regulation.

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Do the SEC’s Enforcement Preferences Affect Corporate Misconduct?

Cited by 140 publications

References 28 publications

Corporate Governance and Public Reprimand

Corporate Governance and Public Reprimand

The Contagion Effect of Low-Quality Audits

SOX after Ten Years: A Multidisciplinary Review

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