SEC Attention, A to Z
56 Pages Posted: 22 Nov 2019 Last revised: 31 Jan 2023
Date Written: January 2023
I use downloads of regulatory filings by Securities and Exchange Commission (SEC) employees as a novel measure of SEC attention and find that SEC employees are significantly less likely to review the regulatory filings of firms whose names fall later in the alphabet. This result is consistent with SEC employees paying more attention to firms that have more prominent placement at the top of alphabetically sorted lists. Importantly, the attention effects of alphabetical order have material implications for firm compliance. Using shocks to alphabetical order caused by firm name changes as well as changes in the alphabetical composition of other firms, I find that alphabetically induced increases in SEC attention significantly decrease the probability that firms have accounting irregularities, experience securities litigation, or engage in behavior that results in an SEC enforcement action. Further tests show that alphabetical ordering determines a firm’s priority when the SEC follows up on common shocks among peer firms and that the SEC is more surprised by the restatements of end-of-the-alphabet firms. Overall, this study highlights the “human” element of regulatory attention and the importance of this attention in preventing costly noncompliance.
Keywords: Regulatory Attention; Securities & Exchange Commission; Heuristics; Behavioral Biases
JEL Classification: G18, G38, M4
Suggested Citation: Suggested Citation