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To: scion who wrote (781)	5/26/2010 11:18:42 AM
From: scion	Read Replies (1) \| Respond to of 53574

Do More Transparent Corporate Actions Following a Restatement Influence the SEC’s Decision to Issue an Enforcement Action? Rebecca L. Files Texas A&M University Mays Business School Accounting Department 460 Wehner, 4353 TAMU College Station, TX 77843 rfiles@mays.tamu.edu Current Draft: February 2009 ABSTRACT: This study examines whether corporate transparency about a restatement influences the Securities and Exchange Commission’s (SEC) decision to issue an enforcement action. I consider corporate transparency to be higher when firms initiate an independent investigation into the restatement, display the restatement in a more prominent press release location, and/or report the restatement in a more visible SEC filing (i.e., Form 8-K). I find that, on average, greater restatement transparency increases the likelihood of an SEC sanction, after controlling for restatement severity. This result is strongest before the Sarbanes-Oxley Act of 2002 (SOX), where all three proxies for corporate transparency are positive and significant predictors of SEC enforcement actions. After SOX, however, more visible SEC filings decrease the likelihood of an SEC sanction, suggesting that the SEC rewards this type of transparent behavior. In addition, the SEC also rewards corporate transparency by reducing monetary penalties when an enforcement action is issued. A “misstatement” refers to the incorrect financial report(s) in prior periods, while a “restatement” represents the subsequently disclosed and corrected financial statements. acctwkshop.cox.smu.edu