Protecting Wall Street or Main Street: The Effect of Ownership Characteristics on SEC Oversight and Enforcement

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2019-08-29
Authors
Iselin, Michael
Johnson, Bret
Ott, Jacob
Raleigh, Jacob
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In this study we examine whether ownership characteristics of a firm influence the likelihood of SEC oversight and enforcement. We specifically ask whether the percentage of retail ownership of a firm affects the likelihood of the firm either receiving an SEC comment letter or an Accounting and Auditing Enforcement Release (AAER). We find that retail ownership percentage is negatively associated with the receipt of an SEC comment letter. In contrast, we find a positive association between retail ownership percentage and an AAER following a restatement. These results are consistent with the SEC trading off its regulatory efforts to protect retail versus institutional investors based on the nature of the potential misreporting, and only stepping in to protect retail investors in the most egregious cases.
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SEC, Retail Investors, Comment Letters, AAERs
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