The Valuation Impact of SEC Enforcement Actions on Nontarget Foreign Firms

54 Pages Posted: 12 Jan 2011 Last revised: 18 Nov 2015

Multiple version iconThere are 2 versions of this paper

Date Written: September 29, 2015


This study shows that the Securities and Exchange Commission’s (SEC) enforcement intensity toward the foreign firms under its jurisdiction has increased dramatically over the past two decades. Because enforcement events signify an increased threat of future enforcement, I examine the stock returns of foreign firms not targeted by the SEC during windows around enforcement actions that target foreign firms. This design captures the net effects of public enforcement and helps to rule out omitted variables as alternative explanations, because other factors would have to align with enforcement events that do not occur in an obvious pattern (and are therefore unlikely to map onto other news). Nontarget firms experience positive stock returns during the event windows, which is consistent with enforcement constraining the risks of expropriation. The cross-sectional pattern in returns reveals greater returns for firms from weak home legal environments. Finally, consistent with the market adjusting to a new enforcement regime, the magnitude of event returns declines over time. Overall, SEC enforcement is associated with increases in the value of foreign firms, supporting the premise of the legal bonding hypothesis.

Keywords: SEC, enforcement, bonding, insider trading, restatements, FCPA

JEL Classification: K20, K42, G18, G38, F23, M48

Suggested Citation

Silvers, Roger, The Valuation Impact of SEC Enforcement Actions on Nontarget Foreign Firms (September 29, 2015). Journal of Accounting Research, Forthcoming, Available at SSRN: or

Roger Silvers (Contact Author)

University of Utah ( email )

1655 E Campus Dr
SLC, UT 01003
United States


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