Political Connections and SEC Enforcement
49 Pages Posted: 21 Aug 2009 Last revised: 29 Apr 2014
Date Written: April 14, 2014
In this study, I examine whether firms and executives with long-term political connections through contributions and lobbying incur lower costs from the enforcement actions by the Securities and Exchange Commission (SEC). I find that politically connected firms on average are less likely to be involved in SEC enforcement actions and face lower penalties if they are prosecuted by the SEC. Contributions to politicians in a strong position to put pressure on the SEC are more effective than others at reducing the probability of enforcement and penalties imposed by an enforcement action. Moreover, the amounts paid to lobbyists with prior employment links to the SEC, and the amounts spent on lobbying the SEC directly, are more effective than other lobbying expenditures at reducing enforcement costs faced by firms.
Keywords: Political connections, Securities and Exchange Commission, Enforcement, Accounting
JEL Classification: M41, G18, G28, G38
Suggested Citation: Suggested Citation