Do SEC reviews of corporate filings improve the information environment?

• Main Author: Qiang, Wei
• Other Authors: Clive Steven Lennox
• Format: Theses and Dissertations
• Language: English
• Published: 2016
• Subjects: DRNTU::Business::Accounting::Disclosure; DRNTU::Business::Finance::Capital market
• Online Access: http://hdl.handle.net/10356/65923
• Institution: Nanyang Technological University

This paper examines how investors perceive the SEC review process for corporate filings. During the course of a review, the SEC staff can issue letters requesting that a company amend a previously-issued filing or include more information in its future filing. If SEC comment letters provide useful information to investors I should observe significant market reactions when the letters are disseminated to investors. Moreover, if the comments improve corporate disclosures, I should observe that investors respond more strongly to filings that were amended or revised as a result of the comment letter process. I find the market reactions to the dissemination of SEC comment letters are small and typically insignificant. The market reacts negatively to amended filings and the market reactions are more negative when the amendments are triggered by SEC comments, although these market reactions are quantitatively small. I also find that investors do not perceive future filings as more informative than the filings previously commented on by the SEC staff. Collectively, my evidence suggests that investors perceive little information content in SEC comment letters and firms’ responses to SEC comment letters.