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The Political Influence of Voters’ Interests on SEC Enforcement

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  • Jonas Heese

Abstract

I examine whether political influence as a response to voters’ interest in employment levels is reflected in the enforcement actions of the SEC. I find that large employers are less likely to experience SEC enforcement actions. Next, I examine whether variations in politicians’ sensitivity to employment levels result in variations in enforcement against large employers. I find that large employers are less likely to face enforcement actions during presidential elections if they are based in politically important states. Large employers also face fewer enforcement actions if they are based in high‐unemployment states during elections of senators who serve on SEC oversight committees. Large employers based in high‐unemployment districts enjoy lower enforcement if their members of Congress serve on SEC oversight committees. The findings suggest that voters’ interests are reflected in SEC enforcement. L'influence politique des intérêts des électeurs sur les décisions de la SEC L'auteur se demande si l'influence politique en réponse à l'intérêt des électeurs pour les niveaux d'emploi se reflète dans les mesures d'exécution prises par la Securities and Exchange Commission (SEC). Il constate que les gros employeurs sont moins susceptibles de faire l'objet de mesures d'exécution de la SEC. L'auteur se demande ensuite si les variations dans la sensibilité des politiciens aux niveaux d'emploi se traduit par des variations dans les mesures d'exécution prises à l'endroit des gros employeurs. Les gros employeurs, observe‐t‐il, sont moins susceptibles de faire l'objet de mesures d'exécution en temps d'élections présidentielles s'ils sont établis dans des États politiquement importants. Les gros employeurs sont également soumis moins que les autres à des mesures d'exécution s'ils sont établis dans des États où le taux de chômage est élevé, en temps d'élection de sénateurs siégeant aux comités de surveillance de la SEC. Les gros employeurs établis dans des districts où le taux de chômage est élevé risquent moins d'être exposés à des mesures d'exécution si leurs représentants au Congrès siègent aux comités de surveillance de la SEC. Ces constatations semblent indiquer que les intérêts des électeurs se reflètent dans les décisions de la SEC.

Suggested Citation

  • Jonas Heese, 2019. "The Political Influence of Voters’ Interests on SEC Enforcement," Contemporary Accounting Research, John Wiley & Sons, vol. 36(2), pages 869-903, June.
  • Handle: RePEc:wly:coacre:v:36:y:2019:i:2:p:869-903
    DOI: 10.1111/1911-3846.12455
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    References listed on IDEAS

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    1. Wolfers, Justin, 2002. "Are Voters Rational? Evidence from Gubernatorial Elections," Research Papers 1730, Stanford University, Graduate School of Business.
    2. Yoshiharu Oritani, 2010. "Public governance of central banks: an approach from new institutional economics," BIS Working Papers 299, Bank for International Settlements.
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    Cited by:

    1. Iselin, Michael & Johnson, Bret & Ott, Jacob & Raleigh, Jacob, 2022. "Protecting wall street or main street: SEC monitoring and enforcement of retail-owned firms," LSE Research Online Documents on Economics 117743, London School of Economics and Political Science, LSE Library.
    2. João Ricardo Faria & Franklin G. Mixon, 2022. "Labor Markets and Sustainability: Short-Run Dynamics and Long-Run Equilibrium," Sustainability, MDPI, vol. 14(7), pages 1-10, April.
    3. Heese, Jonas & Krishnan, Ranjani & Ramasubramanian, Hari, 2021. "The Department of Justice as a gatekeeper in whistleblower-initiated corporate fraud enforcement: Drivers and consequences," Journal of Accounting and Economics, Elsevier, vol. 71(1).
    4. Kaufhold, Ann-Katrin & Langenbucher, Katja & Blank, Patrick & Krahnen, Jan Pieter, 2021. "BaFin (in)dependence - a reform proposal," SAFE White Paper Series 82, Leibniz Institute for Financial Research SAFE.
    5. Woo‐Jong Lee & Jeffrey Pittman & Walid Saffar, 2020. "Political Uncertainty and Cost Stickiness: Evidence from National Elections around the World," Contemporary Accounting Research, John Wiley & Sons, vol. 37(2), pages 1107-1139, June.
    6. Hills, Robert & Kubic, Matthew & Mayew, William J., 2021. "State sponsors of terrorism disclosure and SEC financial reporting oversight," Journal of Accounting and Economics, Elsevier, vol. 72(1).
    7. Byzalov, Dmitri & Basu, Sudipta, 2024. "The misuse of regression-based x-Scores as dependent variables," Journal of Accounting and Economics, Elsevier, vol. 77(2).
    8. Yewei Wu & Bofu Zhang, 2023. "Inquiry Letters and Tax Aggressiveness," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 31(4), pages 37-65, July.
    9. Donelson, Dain C. & Kubic, Matthew & Toynbee, Sara, 2024. "The SEC's September spike: Regulatory inconsistency within the fiscal year," Journal of Accounting and Economics, Elsevier, vol. 77(2).
    10. Jonas Heese, 2022. "Does Industry Employment of Active Regulators Weaken Oversight?," Management Science, INFORMS, vol. 68(12), pages 9198-9218, December.
    11. Ambrocio, Gene & Gu, Xian & Hasan, Iftekhar, 2022. "Political ties and raising capital in global markets: Evidence from Yankee bonds," Journal of Corporate Finance, Elsevier, vol. 74(C).
    12. Raghunandan, Aneesh, 2024. "Government subsidies and corporate misconduct," LSE Research Online Documents on Economics 122855, London School of Economics and Political Science, LSE Library.

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