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University of Michigan Law School

Law & Economics Working Papers

Securities Law

2013

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Full-Text Articles in Law

Scandal Enforcement At The Sec: The Arc Of The Option Backdating Investigations, Stephen Choi, Adam C. Pritchard, Anat C. Wiechman Jan 2013

Scandal Enforcement At The Sec: The Arc Of The Option Backdating Investigations, Stephen Choi, Adam C. Pritchard, Anat C. Wiechman

Law & Economics Working Papers

We study the SEC’s allocation of enforcement resources in the wake of a salient public scandal. We focus on the SEC’s investigations of option backdating in the wake of numerous media articles on the practice of backdating. We find that the SEC shifted its mix of investigations significantly toward backdating investigations and away from investigations involving other accounting issues. We test the hypothesis that SEC pursued more marginal investigations into backdating at the expense of pursuing more egregious accounting issues. Our event study of stock market reactions to the initial disclosure of backdating investigations shows that those reactions declined over …