The Effect of SEC Reviewers on Comment Letters*
Matthew Baugh, Kyonghee Kim, Kwang J. Lee
Accountancy, School of
Prior research suggests that even for the same decision task there will be variation in decision outcomes across decision makers due to idiosyncrasies in their styles. This variation brings up a fundamental challenge in the realm of regulations, where consistency of application is of great importance. This study examines whether the idiosyncrasies of individual employees of the SEC contribute to inconsistent regulatory outcomes. Using a sample of SEC comment letters, we show that SEC reviewers' idiosyncratic style plays a significant role in explaining the cross-sectional variation in filing review outcomes, even after holding firm and disclosure attributes constant. In addition, the likelihood of restatement during the review process varies systemically with the reviewers' review style. These findings suggest that reviewer style influences shareholders and other stakeholders via its impact on the costs in resolving comment letter issues and the quality of corporate disclosure. They also have public policy implications for the way financial reporting rules and regulations are applied.
Contemporary Accounting Research
SEC reviewers
disclosure quality
regulatory consistency
restatements
reviewer style
Dive into the research topics of 'The Effect of SEC Reviewers on Comment Letters*'. Together they form a unique fingerprint.
Restatements Business & Economics 100%
Corporate Disclosure Business & Economics 97%
Review Process Business & Economics 92%
Disclosure Business & Economics 84%
Financial Reporting Business & Economics 71%
Public Policy Business & Economics 64%
Policy Implications Business & Economics 61%
Decision Maker Business & Economics 51%
Baugh, M., Kim, K., & Lee, K. J. (2022). The Effect of SEC Reviewers on Comment Letters*. Contemporary Accounting Research, 39(1), 656-690. https://doi.org/10.1111/1911-3846.12734
The Effect of SEC Reviewers on Comment Letters*. / Baugh, Matthew; Kim, Kyonghee; Lee, Kwang J.
In: Contemporary Accounting Research, Vol. 39, No. 1, 01.03.2022, p. 656-690.
Baugh, M, Kim, K & Lee, KJ 2022, 'The Effect of SEC Reviewers on Comment Letters*', Contemporary Accounting Research, vol. 39, no. 1, pp. 656-690. https://doi.org/10.1111/1911-3846.12734
Baugh M, Kim K, Lee KJ. The Effect of SEC Reviewers on Comment Letters*. Contemporary Accounting Research. 2022 Mar 1;39(1):656-690. doi: 10.1111/1911-3846.12734
Baugh, Matthew ; Kim, Kyonghee ; Lee, Kwang J. / The Effect of SEC Reviewers on Comment Letters*. In: Contemporary Accounting Research. 2022 ; Vol. 39, No. 1. pp. 656-690.
@article{91df40bbcbba4555aec541fb2d46f7ea,
title = "The Effect of SEC Reviewers on Comment Letters*",
abstract = "Prior research suggests that even for the same decision task there will be variation in decision outcomes across decision makers due to idiosyncrasies in their styles. This variation brings up a fundamental challenge in the realm of regulations, where consistency of application is of great importance. This study examines whether the idiosyncrasies of individual employees of the SEC contribute to inconsistent regulatory outcomes. Using a sample of SEC comment letters, we show that SEC reviewers' idiosyncratic style plays a significant role in explaining the cross-sectional variation in filing review outcomes, even after holding firm and disclosure attributes constant. In addition, the likelihood of restatement during the review process varies systemically with the reviewers' review style. These findings suggest that reviewer style influences shareholders and other stakeholders via its impact on the costs in resolving comment letter issues and the quality of corporate disclosure. They also have public policy implications for the way financial reporting rules and regulations are applied.",
keywords = "SEC reviewers, comment letters, disclosure quality, regulatory consistency, restatements, reviewer style",
author = "Matthew Baugh and Kyonghee Kim and Lee, {Kwang J.}",
note = "Funding Information: * Accepted by Hai Lu. We thank Hai Lu (editor), two anonymous reviewers, workshop participants at the US Securities and Exchange Commission, the University of Missouri, the 2017 AAA Annual Meeting, and the 2018 EAA Annual Meeting for their helpful comments. Matthew Baugh acknowledges funding from the W.P. Carey School of Business. Kyonghee Kim acknowledges funding from the Eli Broad College of Business, Michigan State University. † Corresponding author. Publisher Copyright: {\textcopyright} 2021 Canadian Academic Accounting Association.",
doi = "10.1111/1911-3846.12734",
journal = "Contemporary Accounting Research",
T1 - The Effect of SEC Reviewers on Comment Letters*
AU - Baugh, Matthew
AU - Kim, Kyonghee
AU - Lee, Kwang J.
N1 - Funding Information: * Accepted by Hai Lu. We thank Hai Lu (editor), two anonymous reviewers, workshop participants at the US Securities and Exchange Commission, the University of Missouri, the 2017 AAA Annual Meeting, and the 2018 EAA Annual Meeting for their helpful comments. Matthew Baugh acknowledges funding from the W.P. Carey School of Business. Kyonghee Kim acknowledges funding from the Eli Broad College of Business, Michigan State University. † Corresponding author. Publisher Copyright: © 2021 Canadian Academic Accounting Association.
N2 - Prior research suggests that even for the same decision task there will be variation in decision outcomes across decision makers due to idiosyncrasies in their styles. This variation brings up a fundamental challenge in the realm of regulations, where consistency of application is of great importance. This study examines whether the idiosyncrasies of individual employees of the SEC contribute to inconsistent regulatory outcomes. Using a sample of SEC comment letters, we show that SEC reviewers' idiosyncratic style plays a significant role in explaining the cross-sectional variation in filing review outcomes, even after holding firm and disclosure attributes constant. In addition, the likelihood of restatement during the review process varies systemically with the reviewers' review style. These findings suggest that reviewer style influences shareholders and other stakeholders via its impact on the costs in resolving comment letter issues and the quality of corporate disclosure. They also have public policy implications for the way financial reporting rules and regulations are applied.
AB - Prior research suggests that even for the same decision task there will be variation in decision outcomes across decision makers due to idiosyncrasies in their styles. This variation brings up a fundamental challenge in the realm of regulations, where consistency of application is of great importance. This study examines whether the idiosyncrasies of individual employees of the SEC contribute to inconsistent regulatory outcomes. Using a sample of SEC comment letters, we show that SEC reviewers' idiosyncratic style plays a significant role in explaining the cross-sectional variation in filing review outcomes, even after holding firm and disclosure attributes constant. In addition, the likelihood of restatement during the review process varies systemically with the reviewers' review style. These findings suggest that reviewer style influences shareholders and other stakeholders via its impact on the costs in resolving comment letter issues and the quality of corporate disclosure. They also have public policy implications for the way financial reporting rules and regulations are applied.
KW - SEC reviewers
KW - comment letters
KW - disclosure quality
KW - regulatory consistency
KW - restatements
KW - reviewer style
U2 - 10.1111/1911-3846.12734
DO - 10.1111/1911-3846.12734
JO - Contemporary Accounting Research
JF - Contemporary Accounting Research