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The Effectiveness of SEC Enforcement in Deterring Financial Misconduct

24 Pages Posted: 30 Sep 2017 Last revised: 3 Oct 2017

Shiu-Yik Au

York University - Schulich School of Business

Date Written: October 2, 2017

Abstract

This paper examines how the Securities and Exchange Commission’s (SEC) enforcement actions and whom they target deter future financial misconduct. An enforcement action reduces the incidence of misconduct in other firms in the same industry and metropolitan statistical area (MSA) in the future. Furthermore, an enforcement that punishes a guilty company has a larger deterrence effect on future misconduct than punishing an officer, auditor, attorney, or other entity. In addition, the results are robust to using alternative measures of financial misconduct such as restatements and Fscore. These results have several policy implications on how regulatory agencies can maximize the value of their enforcements.

Keywords: financial misconduct, restatement, AAER, deterrence, enforcement, industry, distance, SEC

JEL Classification: G30, G38, K22

Suggested Citation

Au, Shiu-Yik, The Effectiveness of SEC Enforcement in Deterring Financial Misconduct (October 2, 2017). Available at SSRN: https://ssrn.com/abstract=3043955

Shiu-Yik Au (Contact Author)

York University - Schulich School of Business ( email )

Toronto, Ontario
Canada
4166187253 (Phone)

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