Partisan regulatory actions: Evidence from the SEC

Vivek Pandey, Xingyu Shen and Joanna Shuang Wu

Journal of Accounting and Economics, 2025, vol. 80, issue 1

Abstract: We study the influence of political partisanship in SEC investigations and AAER enforcement actions against financial misconduct. We find that the SEC is more likely to launch an investigation against a firm that is misaligned with the agency’s political ideology than other firms. The likelihood of an AAER appears unaffected by political misalignment, but once named in an AAER, a misaligned firm faces harsher penalties than other firms. We find evidence that collectively points to potential misallocation of scarce enforcement resources due to partisanship: conditional on investigation, misaligned firms are less likely to receive an enforcement action, and conditional on misreporting, non-misaligned firms are less likely to be investigated.

Keywords: SEC; Partisanship; Political ideology; Enforcement; Legal penalties; Accounting fraud; Misreporting; Career concerns (search for similar items in EconPapers)
JEL-codes: G18 K22 K42 M41 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:80:y:2025:i:1:s0165410125000138

DOI: 10.1016/j.jacceco.2025.101777

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