Abstract
We study the interplay between the redaction of information from regulatory filings and SEC monitoring of the redacting firms. We find that redactions are associated with more intense SEC monitoring, as evidenced by higher incidence of comment letters and a longer letter resolution process. Hand collected data indicate seller firms that redact information from their sales, licensing, and royalty contracts are more likely to receive revenue recognition-related comment letters, suggesting spurious correlation is not a likely explanation of the inference. We supplement our findings by providing evidence that redacting firms tend to manage proprietary information disclosure, withholding proprietary information that should be made public under extant rules and regulations. Our findings shed light on how various SEC monitoring processes interact and support one another, offering a novel look on the interaction between a firm’s management of proprietary information disclosure and regulatory oversight.
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