The impact of SEC investigations and accounting and auditing enforcement releases on firms’ cost of equity capital

Curtis Nicholls ()
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Curtis Nicholls: Bucknell University

Review of Quantitative Finance and Accounting, 2016, vol. 47, issue 1, No 3, 57-82

Abstract: Abstract I study the impact of an SEC investigation (as captured by accounting and auditing enforcement releases) on a firm’s cost of equity capital. AAERs are often used in accounting literature as a proxy for fraudulent financial reporting. Fraudulent financial reporting should lead to an increase in cost of equity capital as a firm’s future cash flows become less certain. Overall, this study provides evidence of changes in cost of equity capital for firms targeted by an SEC AAER on the date the investigation is first made public.

Keywords: Accounting and auditing enforcement releases; AAER; SEC investigation; SEC enforcement (search for similar items in EconPapers)
JEL-codes: G32 G38 M41 M48 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (7)

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DOI: 10.1007/s11156-014-0494-9

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