SEC Scrutiny Shopping
87 Pages Posted: 8 Jul 2015 Last revised: 20 Dec 2020
Date Written: December 1, 2019
We examine whether firms exploit enforcement heterogeneity in response to heightened risk of investigation by regional Securities and Exchange Commission (SEC) enforcement offices. We find that firms facing high SEC scrutiny risk are more likely to relocate outside the jurisdiction of the SEC regional office. The likelihood of out-of-SEC relocation becomes at least two times higher after exogenous shocks to local SEC enforcement. High scrutiny-risk firms tend to migrate to regions with weaker SEC enforcement history and regions with more peers engaging in misbehavior. Scrutiny shopping is more salient for firms with lower costs of relocation.
Keywords: regulatory enforcement, SEC regulation, forum shopping, corporate relocation
JEL Classification: G34, G38, M41, M48
Suggested Citation: Suggested Citation