SEC monitoring of foreign firms’ disclosures in the presence of foreign regulators

James P. Naughton, Rafael Rogo, Jayanthi - Sunder, Ray Zhang

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

SEC comment letters indicate that the SEC has reviewed the firm’s filings and identified a disclosure issue. Using the existence of an SEC comment letter as a proxy for SEC monitoring, we document a negative association between the level of SEC monitoring of foreign firms and the strength of those foreign firms’ home-country institutions, consistent with the idea that the SEC implicitly shares its regulatory duties with international securities regulators. We find that foreign cross-listed firms are subject to lower monitoring intensity than foreign firms listed only on US exchanges, but do not find a statistically significant difference in monitoring between foreign firms listed only on US exchanges and US firms. These findings suggest that it is the presence of another regulator that drives the intensity of SEC monitoring. We also find that US investor holdings are positively associated with the level of SEC oversight, suggesting that the SEC focuses its resources on firms that pose a greater risk to US investors. Collectively, our analyses show that two countervailing forces drive the SEC’s choice to monitor foreign firms. On the one hand, the SEC reduces monitoring intensity when it can rely on the public and private enforcement institutions in the foreign firm’s home country. On the other hand, the SEC provides increased monitoring of certain foreign firms when investors on US exchanges have greater investment exposure in those firms.

Original languageEnglish (US)
JournalReview of Accounting Studies
DOIs
StateAccepted/In press - Jan 1 2018

Fingerprint

Foreign firms
Monitoring
Disclosure
Investors
Home country
Resources
Oversight
Private enforcement
Public enforcement

Keywords

  • Bonding
  • Comment letters
  • Cross-list
  • G15
  • G18
  • M41
  • Regulatory coordination
  • SEC

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting(all)

Cite this

SEC monitoring of foreign firms’ disclosures in the presence of foreign regulators. / Naughton, James P.; Rogo, Rafael; Sunder, Jayanthi -; Zhang, Ray.

In: Review of Accounting Studies, 01.01.2018.

Research output: Contribution to journalArticle

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