Title page for ETD etd-12212011-170804

Type of Document Dissertation
Author Edmonds, Jennifer Echols
URN etd-12212011-170804
Title An Investigation of the Effectiveness of the Division of Corporate Finance as a Monitor of Financial Reporting
Degree PhD
Department Accounting and Information Systems
Advisory Committee
Advisor Name Title
Cloyd, C. Bryan Committee Chair
Brown, Robert M. Committee Member
Hansen, T. Bowe Committee Member
Maher, John J. Committee Member
Mansi, Sattar A. Committee Member
  • Disclosure Quality
  • Forward Earnings Response Coefficient
  • Comment Letters
Date of Defense 2011-12-14
Availability restricted
This study uses the Securities and Exchange Commission’s (SEC) comment letters to investigate the SEC’s role as a monitor of financial reporting. I examine whether the SEC effectively comments on firms with poor disclosure quality. I utilize forward earnings response coefficients (FERC) as a measure of the market’s perception of disclosure quality. I expect comment letter firms to have lower disclosure quality and thus lower FERCs. Secondly, within the firms selected for comment, I investigate whether the Division allocates a greater amount of resources towards firms with more severe disclosure deficiencies. Results indicate that comment letter recipients have significantly lower forward earnings response coefficients than non- recipients. Results also document that comment letter recipients have lower contemporaneous earnings response coefficients than non-recipients. These findings are consistent with the DCF being effective in selecting firms that are perceived by the market as having low disclosure and earnings quality. However, within comment letter firms, I am unable to provide any evidence that the DCF allocates more resources to firms with lower forward earnings response coefficients.
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