Regulatory Oversight of Financial Reporting: Securities and Exchange Commission Comment Letters
City University London - Sir John Cass Business School; Rice University - Jesse H. Jones Graduate School of Business
Massachusetts Institute of Technology (MIT) - Sloan School of Management
June 4, 2014
The Securities and Exchange Commission (SEC) reviews company filings (10Q, 10K, S1, etc.) submitted to them. If a review identifies potential deficiencies, the SEC staff sends the company a comment letter seeking clarification, additional information, and ultimately perhaps, revision of the filing or future filings. We explore the content and resolution of SEC comment letters and then examine the informational consequences of letter resolution. The content analysis shows that nearly half of all comments involve accounting application, financial reporting, and disclosure issues. More than 17% of our sample immediately amend filings to resolve comment letters, and financial statements and/or footnotes are frequently revised. Following comment letter resolution, return volatility and trading volume around earning announcements decline and analyst forecast accuracy improves. We conclude the SEC’s oversight has beneficial informational effects.
Number of Pages in PDF File: 74
Keywords: Securities and Exchange Commission (SEC), Comment Letter, Disclosure, Enforcement, Regulation
JEL Classification: G12, G14, G18, M48
Date posted: October 29, 2008 ; Last revised: June 5, 2014
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