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To Comply or Not to Comply: Understanding the Discretion in Reporting Public Float and SEC Regulations

42 Pages Posted: 7 Feb 2010 Last revised: 7 Oct 2016

Feng Gao

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick

Date Written: February 5, 2015

Abstract

This paper documents how firms exercise discretion in defining affiliates and reporting public float in response to SEC regulations. I find that firms with higher expected compliance costs under Section 404 of the Sarbanes-Oxley Act (SOX) of 2002 tend to classify more shares as affiliated and report lower public float. In contrast, firms issuing seasoned equity are less likely to underreport public float, possibly due to favorable regulatory treatment for large issuers. These incentives are weakened when future regulatory changes render float less important.

Keywords: SOX, Section 404, Public Float, Form S-3, Security Registration

JEL Classification: G18, K22, M41, M4

Suggested Citation

Gao, Feng, To Comply or Not to Comply: Understanding the Discretion in Reporting Public Float and SEC Regulations (February 5, 2015). Contemporary Accounting Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1549165 or http://dx.doi.org/10.2139/ssrn.1549165

Feng Gao (Contact Author)

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick ( email )

Janice H. Levin Bldg., Room 121
94 Rockafeller Road
Piscataway, NJ 08854-8054
United States

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