Securities Law Expertise and Corporate Disclosure

61 Pages Posted: 18 Sep 2015 Last revised: 24 Aug 2018

See all articles by Zahn Bozanic

Zahn Bozanic

Ohio State University (OSU) - Fisher College of Business

Preeti Choudhary

University of Arizona, Eller College of Management

Kenneth J. Merkley

Indiana University - Kelley School of Business - Department of Accounting

Date Written: August 1, 2018

Abstract

We examine whether securities lawyers involved in SEC comment letter inquiries act as client advocates by resisting disclosure changes or as gatekeepers by encouraging disclosure transparency. Consistent with an advocacy role, we find that securities lawyers’ involvement in SEC comment letters is associated with resisting disclosure inquiries through redacting information from filings and issuing fewer amendments to previous disclosures. Our evidence also supports the view that the role of securities lawyers extends beyond the specific inquiry; their involvement is associated with improved readability and more cautionary language in the subsequent 10-K and fewer future restatements and comment letters. Lastly, we find that securities lawyers serve more of an advocacy role when proprietary costs are high and when the inquiry involves a possible amendment, but more of a gatekeeper role when an inquiry is more complex.

Keywords: External advisor, legal counsel, securities law, disclosure, SEC, comment letters, regulation

JEL Classification: M41

Suggested Citation

Bozanic, Zahn and Choudhary, Preeti and Merkley, Kenneth J., Securities Law Expertise and Corporate Disclosure (August 1, 2018). The Accounting Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2662096 or http://dx.doi.org/10.2139/ssrn.2662096

Zahn Bozanic (Contact Author)

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

Preeti Choudhary

University of Arizona, Eller College of Management ( email )

Department of History
Tucson, AZ 85721
United States

Kenneth J. Merkley

Indiana University - Kelley School of Business - Department of Accounting ( email )

1309 E. 10th Street
Bloomington, IN 47405
United States

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