Scandinavian Working Papers in Economics

Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

No 364: Public Enforcement of Securities Market Rules: Resource-based evidence from the Securities Exchange Commission

Tim Lohse (), Razvan Pascalau () and Christian Thomann ()
Additional contact information
Tim Lohse: Berlin School of Economics and Law, & Max Planck Institute for Tax Law and Public Finance,, Postal: Berlin School of Economics and Law, , Alt-Friedrichsfelde 60, , 10315 Berlin, , Germany.
Razvan Pascalau: Department of Economics and Finance,, Postal: SUNY Plattsburgh, , 101 Broad Street, , Ausable Hall 325, , Plattsburgh, NY, , 12901, U.S.,
Christian Thomann: Royal Institute of Technology (KTH), Centre of Excellence for Science and Innovation Studies (CESIS), Ministry of Finance, & Leibniz University of Hannover, Postal: Royal Institute of Technology, SE-100 44 Stockholm, Sweden

Abstract: We empirically investigate whether increases in the U.S. Securities and Exchange Commission’s (SEC) budget have an effect on firms’ compliance behavior with securities market rules. Our study uses a dataset on the SEC’s resources and its enforcement actions over a period beginning shortly after the Second World War and ending in 2010. We find that increases in the SEC’s resources both improve compliance and lead to an increased activity level of the SEC. The higher level of compliance is reflected by a decrease in the numbers of enforcement cases. The increased activity level is reflected by a surge in the number of inves-tigations conducted by the SEC.

Keywords: Public enforcement; securities laws; compliance; Securities and Exchange Com-mission; budget

JEL-codes: D21; G14; G18; K22

38 pages, May 20, 2014

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