Regulatory transparency and the alignment of private and public enforcement: Evidence from the public disclosure of SEC comment letters

Amy Hutton, Susan Shu and Xin Zheng

Journal of Financial Economics, 2022, vol. 145, issue 1, 297-321

Abstract: Does enhanced regulatory transparency facilitate alignment of private and public enforcement? Utilizing the SEC's 2004 decision to publicly disclose its comment letters, we explore the actions of the SEC and shareholder litigants. We find the two parties converge more on enforcement targets after the public disclosure. The increased alignment is attributable to public scrutiny of SEC oversight enhancing regulator incentives and reducing regulatory capture, and to shareholder plaintiffs gaining information previously accessible only by regulators, enabling litigants to identify cases with “merit.” These findings suggest regulatory transparency enhances the complementarity of public and private enforcement, potentially improving enforcement outcomes.

Keywords: Sec comment letters; Shareholder litigation; Regulatory transparency; Enforcement (search for similar items in EconPapers)
JEL-codes: G18 G38 K41 K42 L51 M40 M41 M48 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:145:y:2022:i:1:p:297-321

DOI: 10.1016/j.jfineco.2021.07.011

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