An Investigation of the Effectiveness of the Division of Corporate Finance as a Monitor of Financial Reporting

This study uses the Securities and Exchange Commission's (SEC) comment letters to investigate the SEC's role as a monitor of financial reporting. I examine whether the SEC effectively comments on firms with poor disclosure quality. I utilize forward earnings response coefficients (FERC) as a measure of the market's perception of disclosure quality. I expect comment letter firms to have lower disclosure quality and thus lower FERCs. Secondly, within the firms selected for comment, I investigate whether the Division allocates a greater amount of resources towards firms with more severe disclosure deficiencies. Results indicate that comment letter recipients have significantly lower forward earnings response coefficients than non- recipients. Results also document that comment letter recipients have lower contemporaneous earnings response coefficients than non-recipients. These findings are consistent with the DCF being effective in selecting firms that are perceived by the market as having low disclosure and earnings quality. However, within comment letter firms, I am unable to provide any evidence that the DCF allocates more resources to firms with lower forward earnings response coefficients.

Name thesis:degree_name

Ph. D.

Level thesis:degree_level

doctoral

Discipline thesis:degree_discipline

Accounting and Information Systems

Department dc:contributor.department

Accounting and Information Systems

Grantor dc:publisher

Virginia Tech

Year dc:date.issued

2011

Author dc:creator

• Edmonds, Jennifer Echols

Chair dc:contributor.committeechair

• Cloyd, C. Bryan

Committee members dc:contributor.committeemember

• Brown, Robert M.
• Hansen, Thomas Bowe
• Maher, John J.
• Mansi, Sattar A.

• Disclosure Quality
• Forward Earnings Response Coefficient
• Comment Letters

Statement dc:rights

• In Copyright

Licence dc:rights.uri

• http://rightsstatements.org/vocab/InC/1.0/

Dc Identifier Other

etd-12212011-170804

OAI identifier oai:identifier

oai:vtechworks.lib.vt.edu:10919/40437