SEC Scrutiny Shopping
58 Pages Posted: 8 Jul 2015 Last revised: 5 Nov 2019
Date Written: December 2019
We examine whether firms exploit enforcement heterogeneity in response to risks and costs arising from investigations 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 their SEC regional office. The likelihood of relocation becomes at least two times higher after exogenous local enforcement shocks. 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