Noncompliance with Non‐Accounting Securities Regulations and GAAP Violations

30 Pages Posted: 25 Apr 2019

See all articles by Sunhwa Choi

Sunhwa Choi

Sungkyunkwan University

Steven Young

Lancaster University - Department of Accounting and Finance

Xiu-Ye Zhang

Australian National University (ANU) - School of Accounting & Business Information Systems

Date Written: March/April 2019

Abstract

Using enforcement actions by the Securities and Exchange Commission (SEC) as a proxy for noncompliance with securities regulations, we examine whether a firm's compliance with non‐accounting laws and regulations is associated with GAAP violations. We find that firms that violate securities regulations related to non‐accounting issues are more likely to report accounting restatements than control firms that comply with securities regulations. We also find that the difference between the two groups is significant only for the periods subsequent to the start of the noncompliance period but not for periods prior to this date. Our results highlight the interrelation between the accounting and compliance systems, and suggest that managers who are non‐compliant with non‐accounting regulations are also more likely to be non‐compliant with accounting rules.

Keywords: compliance, GAAP violations, noncompliance with securities regulations, SEC's enforcement actions

Suggested Citation

Choi, Sunhwa and Young, Steven and Zhang, Xiu-Ye, Noncompliance with Non‐Accounting Securities Regulations and GAAP Violations (March/April 2019). Journal of Business Finance & Accounting, Vol. 46, Issue 3-4, pp. 370-399, 2019. Available at SSRN: https://ssrn.com/abstract=3377615 or http://dx.doi.org/10.1111/jbfa.12377

Sunhwa Choi

Sungkyunkwan University ( email )

Sunkyunkwan University Business School
25-2, Sungkyunkwan-ro, Jongno-gu
Seoul, 03063
Korea, Republic of (South Korea)

Steven Young

Lancaster University - Department of Accounting and Finance ( email )

The Management School
Lancaster LA1 4YX
United Kingdom
+441 5245-94242 (Phone)
+441 5248-47321 (Fax)

Xiu-Ye Zhang (Contact Author)

Australian National University (ANU) - School of Accounting & Business Information Systems ( email )

Canberra
Australia

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