SEC Investigations and Securities Class Actions: An Empirical Comparison
Stephen J. Choi
New York University School of Law
Adam C. Pritchard
University of Michigan Law School
June 3, 2015
U of Michigan Law & Econ Research Paper No. 12-022
NYU Law and Economics Research Paper No. 12-38
Using actions with both an SEC investigation and a class action as our baseline, we compare the targeting of SEC-only investigations with class action-only lawsuits. Looking at measures of information asymmetry, we find that investors in the market perceive greater information asymmetry following the public announcement of the underlying violation for class action-only lawsuits compared with SEC-only investigations. Turning to sanctions, we find that the incidence of top officer resignation is greater for class action-only lawsuits relative to SEC-only investigations. Our findings are consistent with the private enforcement targeting disclosure violations at least as precisely (if not more) than SEC enforcement.
Number of Pages in PDF File: 37
Keywords: fraud, SEC Enforcement, securities class actions
JEL Classification: K22, K42
Date posted: July 16, 2012 ; Last revised: June 10, 2015
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