Partisan Regulatory Actions: Evidence from the SEC

58 Pages Posted: 16 Apr 2024

See all articles by Vivek Pandey

Vivek Pandey

University of Rochester - Simon Business School

Xingyu Shen

University of Rochester - Simon Business School

Joanna S. Wu

University of Rochester - Simon Business School

Date Written: April 9, 2024

Abstract

We study the influence of political partisanship in SEC investigations and AAER enforcement actions against financial misconduct. We find that the SEC is more likely to launch an investigation against a firm that is misaligned with the agency's political ideology than for other firms. The likelihood of an AAER appears unaffected by political misalignment, but once named in an AAER, a misaligned firm faces harsher penalties than other firms. We find higher Type I error rates (more false positives) in SEC investigations among misaligned firms and higher Type II error rates (more false negatives) among non-misaligned firms, suggesting misallocation of scarce enforcement resources due to partisanship.

Keywords: SEC, Partisanship, Political ideology, Enforcement, Legal penalties, Accounting fraud,Misreporting, Career concerns

JEL Classification: G18, K22, K42, M41

Suggested Citation

Pandey, Vivek and Shen, Xingyu and Wu, Joanna Shuang, Partisan Regulatory Actions: Evidence from the SEC (April 9, 2024). Available at SSRN: https://ssrn.com/abstract=4789073 or http://dx.doi.org/10.2139/ssrn.4789073

Vivek Pandey (Contact Author)

University of Rochester - Simon Business School ( email )

Xingyu Shen

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

Joanna Shuang Wu

University of Rochester - Simon Business School ( email )

Carol Simon Hall 3-160D
Rochester, NY 14627
United States
585-275-5468 (Phone)
585-442-6323 (Fax)

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