Is the SEC Captured? Evidence from Comment-Letter Reviews

56 Pages Posted: 6 Apr 2017 Last revised: 8 Apr 2017

Jonas Heese

Harvard Business School

Mozaffar Khan

University of Minnesota - Twin Cities - Carlson School of Management

Karthik Ramanna

Harvard University - Harvard Business School; University of Oxford - Blavatnik School of Government

Date Written: April 5, 2017

Abstract

SEC oversight of publicly listed firms ranges from comment letter (CL) reviews of firms’ reporting compliance to pursuing enforcement actions against violators. Prior literature finds that firm political connections (PC) negatively predict enforcement actions, inferring SEC capture. We present new evidence that firm PC positively predict CL reviews and substantive characteristics of such reviews, including the number of issues evaluated and the seniority of SEC staff involved. These results, robust to identification concerns, are inconsistent with SEC capture and indicate a more nuanced relation between firm PC and SEC oversight than previously suggested.

Keywords: comment letters, political connections, regulatory capture, SEC enforcement

JEL Classification: D72, G18, M41, M48

Suggested Citation

Heese, Jonas and Khan, Mozaffar and Ramanna, Karthik, Is the SEC Captured? Evidence from Comment-Letter Reviews (April 5, 2017). Harvard Business School Accounting & Management Unit Working Paper No. 17-087. Available at SSRN: https://ssrn.com/abstract=2947752

Jonas Heese (Contact Author)

Harvard Business School ( email )

Soldiers Field Road
Morgan Hall 397
Boston, MA 02163
United States

Mozaffar Khan

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

Karthik Ramanna

Harvard University - Harvard Business School ( email )

Boston, MA 02163
United States

University of Oxford - Blavatnik School of Government ( email )

10 Merton St
Oxford, Oxfordshire OX1 4JJ
United Kingdom

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