Short Memories? The Impact of SEC Enforcement on Insider Leakage
33 Pages Posted: 19 Apr 2021
Date Written: October 1, 2019
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.
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: Suggested Citation