Review of Accounting Studies

, Volume 23, Issue 4, pp 1355–1388 | Cite as

SEC monitoring of foreign firms’ disclosures in the presence of foreign regulators

  • James P. Naughton
  • Rafael RogoEmail author
  • Jayanthi Sunder
  • Ray Zhang


SEC comment letters indicate that the SEC has reviewed the firm’s filings and identified a disclosure issue. Using the existence of an SEC comment letter as a proxy for SEC monitoring, we document a negative association between the level of SEC monitoring of foreign firms and the strength of those foreign firms’ home-country institutions, consistent with the idea that the SEC implicitly shares its regulatory duties with international securities regulators. We find that foreign cross-listed firms are subject to lower monitoring intensity than foreign firms listed only on US exchanges, but do not find a statistically significant difference in monitoring between foreign firms listed only on US exchanges and US firms. These findings suggest that it is the presence of another regulator that drives the intensity of SEC monitoring. We also find that US investor holdings are positively associated with the level of SEC oversight, suggesting that the SEC focuses its resources on firms that pose a greater risk to US investors. Collectively, our analyses show that two countervailing forces drive the SEC’s choice to monitor foreign firms. On the one hand, the SEC reduces monitoring intensity when it can rely on the public and private enforcement institutions in the foreign firm’s home country. On the other hand, the SEC provides increased monitoring of certain foreign firms when investors on US exchanges have greater investment exposure in those firms.


Regulatory coordination Cross-list Bonding SEC Comment letters 

JEL codes

G15 G18 M41 



We appreciate helpful suggestions and comments from Patricia Dechow, Bret Johnson, Alistair Lawrence, Russell Lundholm, Sarah McVay, James Ryans, Lakshmanan Shivakumar, Roger Silvers, Aida Wahid, Clare Wang, Beverly Walther, Maria Wieczynska, Holly Yang, and workshop participants at Colorado Summer Accounting Research Conference, Conference on Financial Economics and Accounting, Journal of Accounting, Auditing and Finance Conference, UBCOW Conference, AAA Annual Meeting, University of California Berkeley, University of British Columbia, Arizona State University, University of Miami, and Burton Conference at Columbia University.


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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Kellogg School of ManagementNorthwestern UniversityEvanstonUSA
  2. 2.Kelley Business SchoolIndiana UniversityBloomingtonUSA
  3. 3.Eller College of ManagementUniversity of ArizonaTucsonUSA
  4. 4.Beedie School of BusinessSimon Fraser UniversityBurnabyCanada

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