Securities And Exchange Commission Filings Research Articles

Big Players Pivot in Response to Regulatory Pressures

_ Early January brought with it significant changes in the environmental side of the oil and gas industry. ExxonMobil and Chevron, the two largest US oil producers, announced they will exit California, and the Biden administration froze LNG export approvals. After 50 years of producing oil in California, ExxonMobil will take a $2.5 billion writedown of the value of some of its California properties to be recorded in its fourth-quarter earnings. The company said the decision is primarily related to its Santa Ynez operations off the coast of Santa Barbara. Its US Securities and Exchange Commission (SEC) filing said, “While the Corporation is progressing efforts to enable a restart of production, continuing challenges in the state regulatory environment have impeded progress in restoring operations.” After the Refugio oil spill in May 2015 (approximately 100,000 gal), resulting from a leak from a pipeline owned by Plains All American Pipeline, ExxonMobil acquired the damaged asset in October 2015. Just a few months before the purchase, the Santa Barbara County Board denied ExxonMobil’s request to truck its oil produced off the coast of Gaviota to its Las Flores Canyon processing facility and on to refiners located in Pentland, California. Seeking an alternative, ExxonMobil planned to replace two stretches of the 112-mile corroded pipeline for transit of its oil. Met with opposition to replace the damaged pipeline and denied permission to repair and restart production at the site (halted since 2015), ExxonMobil is now selling the Santa Ynez operation to Sable Offshore, a blank-check company created in 2020. The company will loan Sable the money for the purchase of its three offshore production platforms, pipeline, and onshore processing facility. Sable’s agreement with ExxonMobil requires production to be started by early 2026 or the assets and liabilities revert to ExxonMobil. Chevron, headquartered in San Ramon, California, will write down $3.5 billion to $4 billion in assets, citing its home state’s regulations that “have resulted in lower anticipated future investment levels.” The company intends to continue operating its oil fields and related assets. In the SEC filing, Chevron wrote it also will incur fourth-quarter charges related to decommissioning of US Gulf of Mexico assets that have reached the end of their productive lives. The company sold some of those assets, but US law stipulates that previous owners may be responsible for those costs if the current owner declares bankruptcy. Chevron wrote it’s “probable” that it may see such costs. January closed with another unexpected announcement on 26 January. The Biden administration paused decisions on permits to export LNG to non-free trade agreement countries to review current projects seeking approvals. US Energy Secretary Jennifer Granholm stated, “We must review export applications using the most comprehensive, up-to-date analysis of the economic, environmental, and national security considerations.” She added that this was not a ban on exports and would not affect already authorized exports, which when combined with existing plants, total 48 Bcf/D. “Within this decade another 12 Bcf/D of US export capacity already authorized and under construction will come online,” Granholm said. While environmental impact (greenhouse gas emissions including CO2 and methane) was one of the reasons for the decision, along with market, economic, national security, and energy security, Granholm pointed out that facilities totaling 22 Bcf/D of capacity have been approved but have not yet started construction. This capacity, combined with existing infrastructure, is “more than enough to make the US a ‘behemoth’ in the LNG field,” according to Holland & Knight in an analysis dated 29 January. The international law firm said this raises the question of whether further development of LNG facilities could hurt US citizens as higher percentages of produced gas are exported. “This line of thinking follows the historical rhetoric on this issue as domestic users of natural gas want to ensure their feedstock price is stable. To support those claims, recent studies have concluded that ‘higher LNG exports create a tighter domestic natural gas market (all else held equal), increasing domestic natural gas prices.’” Could unintended consequences of these recent announcements rear up in the future? And could they be a behemoth for the US or global markets? For Further Reading Growth in 2022 US LNG Liquefaction Capacity Hits Top of the Charts by Pat Davis Szymczak, SPE Oil and Gas Facilities.

What do firms say in reporting on impacts of climate change? An approach to monitoring ESG actions and environmental policy

AbstractThis article focuses on two research questions arising from the 2010 U.S. Securities and Exchange Commission (SEC) Advisory on climate change reporting: (1) How does the discussion of climate change in SEC filings change after the Advisory? and (2) What are firms talking about when they talk about climate change? Findings were obtained from the 218,000 10‐K filings to the SEC during the 2000–2019 period. The study develops and applies text mining methodology based on extracting information from the “semantic associates” in the “neighborhoods” of indicative terms. On (1) it finds that climate change‐related reporting does increase substantially after the SEC guidance. On (2) a nuanced picture emerges. Firms with comparatively larger transition risks tend to discuss climate change comparatively more, focusing on regulation‐related topics. Firms exposed to the physical risks of climate change tend to discuss climate change somewhat less, focusing on meteorological topics. The results enrich our understanding regarding environmental policies and firms' behaviors regarding climate change. Theoretical and practical implications are provided.

Do SEC filings indicate any trends? Evidence from the sentiment distribution of forms 10-K and 10-Q with FinBERT

PurposeThis study quantified companies' views on the COVID-19 pandemic with sentiment analysis of US public companies' disclosures. The study aims to provide timely insights to shareholders, investors and consumers by exploring sentiment trends and changes in the industry and the relationship with stock price indices.Design/methodology/approachFrom more than 50,000 Form 10-K and Form 10-Q published between 2020 and 2021, over one million texts related to the COVID-19 pandemic were extracted. Applying the FinBERT fine-tuned for this study, the texts were classified into positive, negative and neutral sentiments. The correlations between sentiment trends, differences in sentiment distribution by industry and stock price indices were investigated by statistically testing the changes and distribution of quantified sentiments.FindingsFirst, there were quantitative changes in texts related to the COVID-19 pandemic in the US companies' disclosures. In addition, the changes in the trend of positive and negative sentiments were found. Second, industry patterns of positive and negative sentiment changes were similar, but no similarities were found in neutral sentiments. Third, in analyzing the relationship between the representative US stock indices and the sentiment trends, the results indicated a positive relationship with positive sentiments and a negative relationship with negative sentiments.Originality/valuePerforming sentiment analysis on formal documents like Securities and Exchange Commission (SEC) filings, this study was differentiated from previous studies by revealing the quantitative changes of sentiment implied in the documents and the trend over time. Moreover, an appropriate data preprocessing procedure and analysis method were presented for the time-series analysis of the SEC filings.

Are US electric utilities improving their sustainability disclosures and performance?

This paper examines whether voluntary sustainability disclosures are associated with sustainability performance for a sample of 47 investor-owned electric utilities that disclosed SASB-consistent sustainability information in their SEC (U.S. Securities and Exchange Commission) filings in the period 2014–2018. We collect sustainability performance indicators from company sustainability reports to determine whether companies with a good disclosure policy on a topic also have good sustainability performance on the given topic. Our findings suggest that the most frequent disclosures are grid resiliency, greenhouse gas emissions, and end-use efficiency while the least disclosed topics are energy affordability and nuclear safety. The data shows that companies that perform among the best on one sustainability performance measure may not be the best on other measures. Correlation analysis and mean difference tests indicate that there is no strong connection between sustainability performance and disclosure quality. Thus, the present strategy of voluntary sustainability disclosure may not be a direct indicator of actual sustainability performance.

Is Image Encoding Beneficial for Deep Learning in Finance?

In 2012, Securities and Exchange Commission (SEC) mandated all corporate filings for any company doing business in the U.S. be entered into the electronic data gathering, analysis, and retrieval (EDGAR) system. In this work, we are investigating ways to analyze the data available through the EDGAR database. This may serve portfolio managers (pension funds, mutual funds, insurance, and hedge funds) to get automated insights into companies they invest in, to better manage their portfolios. The analysis is based on artificial neural networks applied to the data. In particular, one of the most popular machine learning methods, the convolutional neural network (CNN) architecture, originally developed to interpret and classify images, is now being used to interpret financial data. This work investigates the best way to input data collected from the SEC filings into a CNN architecture. We incorporate accounting principles and mathematical methods into the design of three image encoding methods. Specifically, two methods are derived from accounting principles (sequential arrangement, category chunk arrangement) and one is using a purely mathematical technique [the Hilbert vector arrangement (HVA)]. In this work, we analyze fundamental financial data as well as financial ratio data and study companies from the financial, healthcare, and information technology sectors in the United States. We find that using imaging techniques to input data for CNN works better for financial ratio data but is not significantly better than simply using the 1-D input directly for fundamental data. We do not find the HVA technique to be significantly better than other imaging techniques.

Who CARES? Evidence on the Corporate Tax Provisions of the Coronavirus Aid, Relief, and Economic Security Act from SEC Filings

We use U.S. Securities and Exchange Commission (SEC) filings to provide initial large-sample evidence regarding utilization of corporate tax provisions by U.S. firms under the Coronavirus Aid, Relief, and Economic Security Act (CARES). These tax provisions were intended to provide firms immediate liquidity to prevent widespread bankruptcies and layoffs in response to the COVID-19 pandemic. However, critics have argued that the provisions were poorly targeted and amounted to “giveaways” for shareholders of large corporations. We find that 38 percent of firms discuss at least one of the CARES tax provisions in their SEC filings, a result primarily attributable to the net operating loss (NOL) carryback provision. Firms experiencing lower stock returns during the COVID-19 outbreak are more likely to discuss CARES tax provisions, but not firms in states or industry sectors exhibiting large increases in unemployment. Further, we find a higher likelihood of tax provision discussions for firms with pre-pandemic losses and higher financial leverage. Finally, we document some evidence that firms facing potential reputational or political costs from discussing these tax provisions may have avoided doing so. Our analyses suggest that tax provisions under CARES were not material for most publicly-traded U.S. firms, were not likelier to benefit firms in greater need of liquidity during the pandemic, and that some firms perceived that disclosing benefits would be costly. These findings are important for policymakers as they consider additional economic relief for U.S. corporations while the coronavirus pandemic lingers.

The SEC Filing Review Process: Insights from Accounting Research

As part of its goal to monitor and enhance the quality of information available to investors, the Securities and Exchange Commission (SEC) reviews companies’ filings to ensure compliance with applicable financial reporting and disclosure requirements. Increased public interest and the substantial costs for both the SEC in reviewing and the companies in responding have led to a rapidly growing body of accounting literature that examines the filing review process. We survey and comment on 80 published and unpublished academic research papers in this literature and identify significant gaps that future research should address. We also summarize the institutional features of the filing review process, aiming to inform future academic studies. Our survey should be of interest to both academics and market participants evaluating the effectiveness and efficiency of the filing review process. To download the SAS codes, please visit https://lcunningham.utk.edu/sec-filing-review-process-sas-codes/

Privately-Held Companies: Legislation, Regulation, and Limited Dissemination of Financial Information

Publicly-traded companies have reporting and disclosure requirements set by the U.S. Securities and Exchange Commission (SEC), which includes the public disclosure of financial statements and an annual 10-K report. In contrast, privately-held companies most often do not meet the SEC filing requirements, and therefore, are not required to disclose financial information. For investors and business researchers, this can provide clear challenges for researching privately-held companies. This paper first highlights a sample of the significant legislation and rules affecting disclosure requirements of public and private companies. Then, it offers other government sources for company and industry financial information. Finally, it suggests further resources to educate business owners, investors, and business researchers.

SEC adopts rules to modernize and simplify disclosure

PurposeTo describe the modernization and simplification amendments of certain disclosure requirements of Regulation S-K and related rules and forms recently adopted by the US Securities and Exchange Commission (SEC).Design/methodology/approachThis article provides an overview of the amendments, their effective dates and related practical considerations for companies.FindingsThe amendments cover many provisions within Regulation S-K and affect various forms that rely on the integrated disclosure requirements of Regulation S-K. The amendments are designed to enhance the readability and navigability of SEC filings, to discourage repetition and disclosure of immaterial information and to reduce the burdens on registrants, all while still providing material information to investors. The amendments contain several changes relating to confidential information contained in exhibits. For consistency, parallel amendments have been adopted to rules other than Regulation S-K, as well as to forms for registration statements and reports.Practical implicationsMost of the amendments are effective May 2, 2019. The amendments relating to the redaction of confidential information in certain exhibits became effective April 2, 2019. Given these dates, companies should review the rule changes implemented by the amendment now and consider how they will impact their disclosure in upcoming SEC filings.Originality/valuePractical guidance from experienced lawyers in the Corporate & Securities practice.

Scraping EDGAR with Python

ABSTRACTThis article presents Python codes that can be used to extract data from Securities and Exchange Commission (SEC) filings. The Python program web crawls to obtain URL paths for company filings of required reports, such as Form 10-K. The program then performs a textual analysis and counts the number of occurrences of words in the filing that reflect, for example, uncertainty (or any other quality specified by the researcher). The program can be easily modified to conduct other searches by changing the word list, company names, or SEC filings. The Python program could be used in an introductory graduate data analytics course in finance that has a web crawling or textual analysis component.

Using the SEC's Edgar Portal

This technical note provides hands-on instructions for searching, classifying, and obtaining documents from the U.S. Security and Exchange Commission's (SEC) official document repository, EDGAR. It helps students become familiar with the different types and classifications of SEC filings available for public companies registered with the SEC. Excerpt UVA-C-2395 Aug. 21, 2017 Using the SEC's EDGAR Portal The U.S. Congress passed the Securities Act of 1933 in response to the market crash and ensuing Great Depression. While many states had blue sky laws at the time to regulate public securities markets, the Securities Act marked the first of several bills to regulate securities markets at the federal level and create the first federal securities regulator, the U.S. Securities and Exchange Commission (SEC). The mission of the SEC is to “protect investors, maintain fair, orderly and efficient markets and to facilitate capital formation.” The SEC requires public companies to disclose meaningful financial (and other) information to the general public. Its Electronic Data-Gathering, Analysis, and Retrieval system (EDGAR) is the main system by which the SEC regulates and distributes relevant information to the public. EDGAR performs automated collection, validation, acceptance, and forwarding of submissions by the companies and others required by law to file with the SEC. Below are instructions on how EDGAR may be accessed and searched (Appendix 1); the types and classifications of filings available for viewing (Appendix 2); and the classification of 8-K items (Appendix 3). . . .

Examining the Usefulness of the SEC Filing Review Process: Evidence from Debt Contracting

The Sarbanes-Oxley Act of 2002 requires the Securities and Exchange Commission (SEC) to periodically review registrants’ filings. This study examines whether the SEC review process reveals information that is useful to stakeholders’ risk assessment decisions, beyond information available in other public filings. We use private debt contracting because there are delays in the public disclosure of SEC review correspondence, and because banks have access to private information about borrowers’ ongoing regulatory reviews or investigations. Using within sample and difference-in-differences analyses, and controlling for firm characteristics and other publicly available information at the time of the SEC review, we find that banks charge higher loan spreads to clients during and after an SEC review, and that the increase in loan spreads is higher when the review identifies material errors, issues subject to managerial discretion, and issues related to collateral valuation. These findings suggest that lenders find the information revealed during the SEC review process to be useful in debt contracting, beyond information available in 10-K and other public filings.

The Debt Market Relevance of Disclosure Tone: Evidence from the Pricing of Credit Default Swaps

This paper examines whether corporate disclosure tone conveys credit risk-relevant information to the credit default swaps (CDS) market. Using a large sample of the Securities and Exchange Commission (SEC) 10-K and 10-Q filings, I find that the change in CDS spreads over the three-day window surrounding the SEC filing date is positively associated with the pessimism of the language used in the 10-K or 10-Q filing. Consistent with nonlinear payoff functions for creditors, this association is more pronounced for reference entities with speculative credit ratings. These findings indicate that the tone of periodic SEC filings is useful for CDS investors to evaluate the reference entity’s credit risk. In addition, I find stronger reaction of CDS spreads to disclosure tone when the CDS contract has shorter maturity, equity short sellers are more active, or the reference entity has lower visibility (i.e., smaller size or lower analyst coverage). Overall, these results support the view that disclosure tone has information content for investors in the CDS market in particular and the debt market in general.

Discretionary compliance with mandatory environmental disclosures: Evidence from SEC filings

We examine the determinants of adherence to U.S. Securities and Exchange Commission (SEC) mandated disclosures of environmental sanctions. Our sample includes non-superfund U.S. Environmental Protection Agency (EPA) sanctions between 1996 and 2005. Our results suggest that firms are more likely to provide sanction disclosures if they operate in environmentally sensitive industries, are subject to larger penalties and are voluntarily participating in a supplemental environmental project. Our results also suggest that firms are less likely to disclose sanctions involving judicial proceedings. Overall, we find that voluntary disclosure incentives impact compliance with mandatory reporting requirements. Although incentives exist for firms to comply with mandatory disclosures, our results suggest that increases in mandatory environmental accounting disclosures may not be effective under the current regulatory system despite the use of bright-line materiality thresholds. Our study contributes to the current and ongoing debate about the role and effectiveness of environmental risk disclosure mandates in providing information to the marketplace, as well as “mandated disclosure” rules in general. The value attributed to current and potential environmental disclosure regulations cannot be thoroughly understood without examining disclosure compliance with existing regulations. From an environmental and sustainability disclosure perspective, our findings are particularly germane since these disclosures focus on risks, liabilities, or other reputational shortcomings of the firm.

Employers United: An Empirical Analysis of Corporate Political Speech in the Wake of the Affordable Care Act

Is the Patient Protection and Affordable Care Act (ACA) bad for business? Did the countries' most prominent companies game the Securities and Exchange Commission (SEC) disclosure process to make negative political statements about ObamaCare? Immediately following the ACA's enactment on March 23, 2010, a number of companies drew scrutiny for issuing SEC filings writing off millions – and in AT&T's case, one billion dollars – against expected earnings for 2010 alone, based on a single, discrete tax-law change in the ACA. Congressional and Administration officials accused the firms of being irresponsible and using big numbers to exaggerate the health reform's burden on employers. To further test the suggestion that these disclosures were politically motivated, we searched all publicly filed SEC real-time and scheduled filings for the quarter following the ACA's enactment. We identified 147 firms that issued SEC disclosures relevant to the tax-law change, writing off a total of five billion dollars. Our deeper analysis of these data amplifies the congressional committee's conclusion that the firms' disclosures were consistent with SEC requirements and financial accounting standards. A handful of firms account for the bulk write-offs, but the only evidence of political speech was by politicians. The episode has significant implications for government regulation of corporate speech and the integrity of the securities disclosure system, particularly as the remaining portions of the ACA are implemented.

Promising pessimism: Reading the futures to be avoided in biotech

A number of science and technology studies (STS) scholars have suggested that the performativity of the ‘forward-looking statement’ is an important institutional element of contemporary biocapital. This paper considers how, when making projections that set up expectations about their futures, firms also acknowledge and detail the risk factors that they face in their operations. In other words, in addition to projecting optimistic scenarios, firms advance much more pessimistic images of futures that they wish to avoid: possible failures, disappointments and financial losses. I examine such pessimistic projections in company filings to the US Securities and Exchange Commission (SEC) and investigate their discursive character. I ask what value such pessimism might hold for STS scholars interested in the mangle of science and capital. I sample the SEC filings of three companies: deCODE Genetics, DNAPrint Genomics Inc. and NitroMed Inc. In their own particular ways, these projections exemplify the volatility and the promise of the life sciences in the 21st century. My reading shows that such pessimistic risk factor statements provide interesting commentary on the dynamics of risk and innovation in the context of contemporary biocapital, raising questions to which analysts to date have given little attention.

United States Securities Regulation and Foreign Private Issuers: Lessons from the Sarbanes-Oxley Act

United States Securities Regulation and Foreign Private Issuers: Lessons from the Sarbanes-Oxley Act

The healing of America

The healing of America

The new Form 8-K disclosures

The Securities and Exchange Commission (SEC) has mandated new disclosure requirements in Form 8-K, which became effective on August 23, 2004. The SEC expanded the list of items that have to be reported and accelerated the timeliness of these reports. This study examines the market reactions to 8-Ks filed under the new SEC regime and investigates whether periodic reports (10-K/Qs) became less informative under the new 8-K disclosure rules. We observe that the newly required 8-K items constitute over half of all filings and that most firms disclose the required items within the new shortened period (four business days). We find that all disclosed items (old and new) are associated with abnormal volume and return volatility around both the event and the SEC filing dates, and some items have significant return drifts after the SEC filings. Surprisingly, we find that the information content of periodic reports has not diminished by the more expansive and timely 8-K disclosures under the new guidance, possibly indicating that investors may use periodic filings to interpret the effects of material events that had been disclosed earlier.

Schatzberg Met Disclosure Requirements, Stanford Says

Schatzberg Met Disclosure Requirements, Stanford Says