SEC Investigations and Securities Class Actions: An Empirical Comparison

37 Pages Posted: 16 Jul 2012 Last revised: 10 Jun 2015

Stephen J. Choi

New York University School of Law

Adam C. Pritchard

University of Michigan Law School

Multiple version iconThere are 2 versions of this paper

Date Written: June 3, 2015

Abstract

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.

Keywords: fraud, SEC Enforcement, securities class actions

JEL Classification: K22, K42

Suggested Citation

Choi, Stephen J. and Pritchard, Adam C., SEC Investigations and Securities Class Actions: An Empirical Comparison (June 3, 2015). U of Michigan Law & Econ Research Paper No. 12-022; NYU Law and Economics Research Paper No. 12-38. Available at SSRN: https://ssrn.com/abstract=2109739 or http://dx.doi.org/10.2139/ssrn.2109739

Stephen J. Choi

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

Adam C. Pritchard (Contact Author)

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States
734-647-4048 (Phone)
734-647-7349 (Fax)

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