Political Connections and SEC Enforcement

49 Pages Posted: 21 Aug 2009 Last revised: 29 Apr 2014

Maria M. Correia

London School of Economics and Political Science

Date Written: April 14, 2014

Abstract

In this study, I examine whether firms and executives with long-term political connections through contributions and lobbying incur lower costs from the enforcement actions by the Securities and Exchange Commission (SEC). I find that politically connected firms on average are less likely to be involved in SEC enforcement actions and face lower penalties if they are prosecuted by the SEC. Contributions to politicians in a strong position to put pressure on the SEC are more effective than others at reducing the probability of enforcement and penalties imposed by an enforcement action. Moreover, the amounts paid to lobbyists with prior employment links to the SEC, and the amounts spent on lobbying the SEC directly, are more effective than other lobbying expenditures at reducing enforcement costs faced by firms.

Keywords: Political connections, Securities and Exchange Commission, Enforcement, Accounting

JEL Classification: M41, G18, G28, G38

Suggested Citation

Correia, Maria M., Political Connections and SEC Enforcement (April 14, 2014). Journal of Accounting & Economics (JAE), Forthcoming; Rock Center for Corporate Governance at Stanford University Working Paper No. 61 . Available at SSRN: https://ssrn.com/abstract=1458478 or http://dx.doi.org/10.2139/ssrn.1458478

Maria M. Correia (Contact Author)

London School of Economics and Political Science ( email )

Houghton St
London, London WC2A 2AE
United Kingdom

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