Short Memories? The Impact of SEC Enforcement on Insider Leakage

33 Pages Posted: 19 Apr 2021

See all articles by Sid Ghoshal

Sid Ghoshal

affiliation not provided to SSRN

Martin Bengtzen

King's College London

Stephen Roberts

University of Oxford - Oxford-Man Institute of Quantitative Finance

Date Written: October 1, 2019

Abstract

We study the impact of SEC enforcement on information leakage by corporate insiders. We find, for the first time, that SEC enforcement has a significant and immediate deterrent effect on insider leakage. Furthermore, enforcement actions undertaken after a long period of SEC enforcement inactivity display a more significant effect on leakage, consistent with predictions that insiders adapt their behavior depending on how active they perceive the regulator to be. We also study SEC escalations in sanctioning and find that they have a particularly notable deterrent effect, changing insider leakage behavior for approximately 24 months. Our results suggest that capital markets regulators need to intervene on a regular basis in order to maintain deterrence of undesirable behavior.

Published in Journal of Law, Finance, and Accounting: Vol. 5: No. 2, pp 273-305.

http://dx.doi.org/10.1561/108.00000048

Suggested citation:
S. Ghoshal, M. Bengtzen and S. Roberts (2020), "Short Memories? The Impact of SEC Enforcement on Insider Leakage", Journal of Law, Finance, and Accounting: Vol. 5: No. 2, pp 273-305. http://dx.doi.org/10.1561/108.00000048

Keywords: Time-series models, financial econometrics, illegal behavior and the enforcement of law, nonparametric methods

JEL Classification: C32, C58, K42, C14, G14, K22

Suggested Citation

Ghoshal, Sid and Bengtzen, Martin and Roberts, Stephen, Short Memories? The Impact of SEC Enforcement on Insider Leakage (October 1, 2019). Available at SSRN: https://ssrn.com/abstract=3827855 or http://dx.doi.org/10.2139/ssrn.3827855

Sid Ghoshal

affiliation not provided to SSRN

Martin Bengtzen (Contact Author)

King's College London ( email )

Strand
London, England WC2R 2LS
United Kingdom

Stephen Roberts

University of Oxford - Oxford-Man Institute of Quantitative Finance ( email )

Eagle House
Walton Well Road
Oxford, Oxfordshire OX2 6ED
United Kingdom

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