Being 'Invisible' by Being Transparent

58 Pages Posted: 16 Aug 2021 Last revised: 5 Jul 2022

See all articles by Xinlu Wang

Xinlu Wang

School of Management, Jinan University

Liang Xu

SKEMA Business School

Xinyan Yan

University of South Florida

Haoyi Yang

Nanjing University

Date Written: June 30, 2022

Abstract

This paper examines the effects of SEC proximity on management earnings forecasts. We find that firms located closer to the SEC regional offices issue management earnings forecasts more frequently. Moreover, this relationship strengthens when firms’ peers experience SEC investigations and when firms are more strictly obligated to clarify previous misleading information. Our results suggest that firms use voluntary disclosures to mitigate SEC oversight due to geographic proximity. We further show that firms are likely to gain credibility by disclosing less upwardly biased forecasts and releasing bad news more frequently and in a timelier manner. Investors (analysts) are more likely to adjust their investments (forecasts) according to management earnings forecasts issued by firms located near the SEC offices. The SEC is less likely to issue comment letters to nearby firms that issue management earnings forecasts more frequently.

Keywords: proximity to SEC, SEC oversight, credibility, management earnings forecasts

JEL Classification: G14, G38, M41, M48

Suggested Citation

Wang, Xinlu and Xu, Liang and Yan, Xinyan and Yang, Haoyi, Being 'Invisible' by Being Transparent (June 30, 2022). Available at SSRN: https://ssrn.com/abstract=3904070 or http://dx.doi.org/10.2139/ssrn.3904070

Xinlu Wang

School of Management, Jinan University ( email )

No. 601, West Huangpu Road
Guangzhou, Guangdong 510632
China

Liang Xu

SKEMA Business School ( email )

Lille
France

Xinyan Yan

University of South Florida ( email )

Tampa, FL 33620-5500
United States

Haoyi Yang (Contact Author)

Nanjing University ( email )

Nanjing, Jiangsu 210093
China

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