Styles of Regulators: Evidence from the SEC’s Comment Letters

Abstract

Security regulations are enforced by SEC staff members. Conceptually, the regulations are to be uniformly enforced despite personal differences among SEC enforcers. We offer evidence to the contrary. Using the SEC’s comment letters as our setting, we find that SEC staff members exhibit unique personal “styles.” The effects of their personal styles on firms’ remediation costs, the contents of SEC comment letters, and the quality of firms’ financial reporting are surprisingly large. We manually collect information on SEC staff members. Our results demonstrate that female staff members are generally tougher reviewers and that CPA qualification matters. Overall, our study offers evidence that SEC staff members exhibit individual differences, and their styles shape firms’ financial reporting.