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SEC Investigations and Securities Class Actions: An Empirical Comparison
Author(s) -
Choi Stephen J.,
Pritchard A. C.
Publication year - 2016
Publication title -
journal of empirical legal studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.529
H-Index - 24
eISSN - 1740-1461
pISSN - 1740-1453
DOI - 10.1111/jels.12096
Subject(s) - class action , sanctions , enforcement , class (philosophy) , action (physics) , information asymmetry , private information retrieval , officer , business , empirical research , accounting , law and economics , economics , actuarial science , political science , law , finance , computer security , computer science , state (computer science) , physics , algorithm , quantum mechanics , artificial intelligence , philosophy , epistemology
Using actions with both an SEC investigation and a class action as our baseline, we compare the targeting of SEC‐only investigations with class‐action‐only lawsuits. Looking at measures of information asymmetry, we find that investors in the market perceive greater information asymmetry following the public announcement of the underlying violation for class‐action‐only lawsuits compared with SEC‐only investigations. Turning to sanctions, we find that the incidence of top officer resignation is greater for class‐action‐only lawsuits relative to SEC‐only investigations. Our findings are consistent with the private enforcement targeting disclosure violations at least as precisely as (if not more so than) SEC enforcement.