Abstract

http://ssrn.com/abstract=2026282
 


 



Does It Pay for Firms to Cooperate with Regulators?


Rebecca Files


University of Texas at Dallas

Gerald S. Martin


American University - Kogod School of Business

Stephanie J. Rasmussen


University of Texas at Arlington

July 7, 2014


Abstract:     
This study examines whether cooperation with regulators results in monetary benefits for firms charged with financial misrepresentation. Using a sample of 1,095 enforcement actions by the Securities and Exchange Commission (SEC) and Department of Justice (DOJ), we find that firms credited for cooperation by regulators reduce their monetary penalties by an average of $43.1 million or 65.8%. For those firms not credited for cooperation, the penalties nearly triple. These estimates are robust to using alternative estimators to control for potential selection issues and controlling for the factors used by regulators when determining the amount of monetary penalties assessed. Our results indicate there are significant monetary benefits for firms that regulators deem to be cooperative.

Number of Pages in PDF File: 62

Keywords: Fraud, Penalties, Financial reporting, Litigation, Securities and Exchange Commission

JEL Classification: G38, K22, K42, M41

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Date posted: March 22, 2012 ; Last revised: July 9, 2014

Suggested Citation

Files, Rebecca and Martin, Gerald S. and Rasmussen, Stephanie J., Does It Pay for Firms to Cooperate with Regulators? (July 7, 2014). Available at SSRN: http://ssrn.com/abstract=2026282 or http://dx.doi.org/10.2139/ssrn.2026282

Contact Information

Rebecca Files
University of Texas at Dallas ( email )
P.O. Box 830688
Richardson, TX 75083-0688
United States
Gerald S. Martin (Contact Author)
American University - Kogod School of Business ( email )
Kogod School of Business
4400 Massachusetts Ave., N.W.
Washington, DC 20016-8044
United States
202-885-3914 (Phone)
Stephanie J. Rasmussen
University of Texas at Arlington ( email )
Box 19468
Arlington, TX 76019-0468
United States
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