The SEC has raised concerns that firms’ materiality assessments are biased toward correcting substantial reporting errors as revisions (“little r”) rather than as restatements (“Big R”). Holding constant the degree to which the underlying economics of a misstatement match the SEC’s investigation preferences, I find that the SEC is less likely to investigate revisions than restatements. To infer the SEC’s investigation preferences based only on the underlying economics, I exploit a period without regulated misstatement disclosure before SEC Rule 33-8400. The results further show that the investigation likelihood increases in the degree of the match with the investigation preferences for restatements but is flat for revisions. Consistent with SEC resource constraints, the discount on revisions widens with regional office busyness and geographic distance. The evidence suggests that the SEC’s reliance on the noisy signal of misstatement disclosure undermines its target selection.

Presentations: Duke University, Georgia State University, EAA Doctoral Colloquium 2026, EAA Annual Meeting 2026, Scandinavian Accounting Research Conference (PhD Consortium) 2026

Using a sample of up to 2,503 initial public offerings (IPOs) in 32 countries from 2011–2017, we predict and find that higher levels of country-level accounting enforcement are associated with lower levels of IPO underpricing. IPOs in countries with a relatively low accounting enforcement score (second quintile) exhibit a mean underpricing of 19%, whereas the mean underpricing amounts to just 9% in countries with a relatively high score (fourth quintile). The results remain qualitatively the same when we employ a multi-level model or a difference-in-difference design. In countries that substantially strengthened their accounting enforcement in the 2003–2009 period, the level of IPO underpricing decreased significantly. We show that accounting enforcement matters for the cost of going public.

Regulation Fair Disclosure (Reg FD) was intended to promote fairness by requiring firms to make material information broadly accessible, yet it permits selective disclosure deemed accidental and provides issuers with a relatively flexible window to remedy the mistake via broad public disclosure. Because Reg FD does not apply to investors, recipients of (unintentional) disclosures can capitalize on material information ahead of the market. This study provides evidence of extensive plausibly selective disclosure (PSD) activity. Most firms experience at least one PSD event per year, and the average firm has several. Firms disproportionately remedy PSD through press releases rather than Form 8-K filings, despite press releases imposing higher information processing costs on investors. Trading on PSD yields substantial profits, averaging millions of dollars per event and per firm-year. These profits draw regulatory scrutiny, but SEC investigations appear to have only a limited deterrence effect. We show that underperforming managers may personally benefit from PSD by securing votes from tipped shareholders when the say-on-pay vote is precarious. These findings call into question whether Reg FD has sufficiently leveled the playing field or merely altered, rather than eliminated, selective disclosure practices.

Presentations: SEC Division of Economic and Risk Analysis Seminar*, Cornell University*, University of Georgia*, Emory University*, BYU Accounting Research Symposium*, Conference on Empirical Legal Studies 2026 [scheduled]*

(* Presented by Co-Author)

There is substantial variation in the use of performance-based and capital-based covenants across loan contracts. This raises the question of whether the lender type—relationship versus arm’s-length—helps explain this heterogeneity. Relationship lenders possess superior access to borrowers’ private information, which may reduce reliance on covenant-based monitoring, but may also create scope for hold-up behavior. We document that the ratio of performance-based to capital-based covenants (P/C covenant ratio) is lower in the presence of relationship lending than under arm’s-length lending, and decreases in the intensity of the relationship. We find stronger evidence for the monitoring channel than for the hold-up channel. Our results indicate that the extent of private information relates to the way public accounting information is used in loan contracting. 

Presentations: Leibniz University Hannover*, 10th EIASM Workshop on Accounting & Regulation*

(* Presented by Co-Author)