Research Interest
Regulatory scrutiny, capital markets, mandatory/voluntary disclosure, public finance, and information intermediaries.
Publications
Earnings Conference Calls and the SEC Comment Letter Process
The Securities and Exchange Commission (SEC) reviews firms’ financial reports and issues comment letters to ensure compliance with applicable disclosure and accounting requirements. We explore the nature, determinants, and consequences of SEC comment letters that refer to information disclosed in voluntary earnings conference calls. Using hand-collected data, we document that the SEC primarily references these voluntary disclosures to illustrate insufficiencies and, less commonly, inconsistencies in mandatory filings across a wide range of topics. These letters are more likely to be issued when filing reviews are more complex, SEC staff are less resource constrained, and for firms with more institutional investors and analysts. Conference call–related comments tend to occur during higher-quality review processes and require greater remediation costs than other comments. The SEC’s use of call disclosures also leads to more pronounced changes in firms’ subsequent mandatory filings, particularly when the firm indicates agreement with SEC comments. However, we observe a mixed effect on the overall information environment, consistent with possible unintended consequences for the quality of firms’ voluntary disclosures.
SEC Scrutiny and Corporate Risk-Taking
We examine whether heightened SEC scrutiny of financial reporting affects corporate risk-taking. Because managers are risk-averse, tightened regulatory oversight could increase risk-taking by strengthening accounting’s governance role, or reduce it by constraining managers’ ability to shield themselves from risky outcomes through earnings management. In 2007, the SEC elevated six district offices to the regional level, expanding their authority and enforcement resources. Using this reorganization in a difference-in-differences design, we find that treatment firms in the jurisdictions of the newly elevated offices experience declines in idiosyncratic stock return volatility, R&D expenditures, and innovation relative to control firms, consistent with reduced risk-taking. Treatment firms also exhibit lower earnings management. The effects of heightened scrutiny are concentrated among firms where managers face greater career concerns and where earnings management declines most. Overall, our results suggest that increased regulatory scrutiny can dampen corporate risk-taking by constraining managerial reporting discretion and intensifying risk-related agency frictions.
Working Papers
SEC Investigations of Public Pensions
In recent years, the looming threat of substantial unfunded liabilities and the obligation to meet these financial commitments have become critical issues for numerous state pension plans, prompting concerns about their solvency and management. This study examines the effect on public pension plans of investigations by the U.S. Securities and Exchange Commission (SEC). Utilizing a stacked cohort difference-in-differences design, I observe that state pensions tend to improve investment performance when subjected to SEC investigation. The observed effect is more pronounced for state governments with more conflicts of interest among agencies. Mechanism analyses indicate that SEC scrutiny is associated with increased abnormal board turnover, a reduction in pay-to-play incentives, and increased disclosure transparency. The enhancement of pension fund performance stems primarily from a shift toward passive asset allocation, reduced investment biases, and reduced investment costs. It is accompanied by a decrease in the accounting discretion and an increase in cash contributions from participating employers and state governments. Collectively, these findings suggest SEC scrutiny significantly affects the functioning of state pension plans.