Determinants of Securities Crowdfunding Success Under SEC Regulation Crowdfunding

Market effects of SEC regulation of short-term borrowing disclosure

International Journal of Managerial Finance ◽

10.1108/ijmf-04-2015-0073 ◽

2016 ◽

Vol 12 (5) ◽

pp. 529-557 ◽

Cited By ~ 1

Author(s):

Trevor C. Chamberlain ◽

Abdul-Rahman Khokhar ◽

Sudipto Sarkar

Keyword(s):

Stock Returns ◽

Event Study ◽

Market Reaction ◽

Short Term ◽

Content Type ◽

Financial Firms ◽

Announcement Date ◽

Abnormal Stock Returns ◽

Expected Benefits ◽

Sec Regulation

Purpose The purpose of this paper is to offer an alternative approach to measure the cost-benefit tradeoff, by analyzing stockholders’ reactions to the announcement and vote on the proposed rule. More specifically, the authors use event study methodology to investigate the stock price reaction on two key dates; that is, the announcement date and the voting date of the proposed short-term borrowing disclosure regulation, and argue that positive abnormal stock returns indicate that the expected benefits of the regulation outweigh the compliance costs. A negative reaction would indicate that, in the eyes of investors, the costs of compliance exceed the expected benefits. Design/methodology/approach The authors use event study analysis and apply the market model to equal-weighted portfolios of 2,450 financial and 3,985 non-financial US firms to calculate mean cumulative abnormal stock returns (MCARs, hereafter) on the announcement and voting dates. Then, the authors conduct mean difference tests on firm-level MCARs across three event windows, that is, (−30,−1), (0,+1) and (+2,+30), to confirm if the MCARs of financial firms are different from those of non-financial firms on both the announcement and the voting dates. Finally, robustness tests are performed with alternate benchmark, using value-weighted portfolios, for the market. Findings The authors find that the market reaction is positive and significant at the announcement date and negative and significant at the voting date of the proposed regulation of short-term borrowing disclosure regulation. Overall, the paper documents a positive market reaction, indicating the usefulness of the disclosure from the vantage point of users. Examining and comparing the results for various subsets, including commercial banks and saving institutions, bank holding companies, size quartiles, and exchange listed and OTC registrants, the authors find that a “one-size-fits-all” approach to regulation is undesirable. Originality/value This is first empirical study, to best of the authors’ knowledge, to explore stockholder reaction to a proposed, rather than an enforced, Securities and Exchange Commission (SEC) regulation and may contribute to the SEC’s final decision on the rule. Second, given a dissimilar reaction from investors of different firms, the results suggest that the SEC needs to reconsider its one-size-fit-all approach for the proposed rule. Finally, because the proposed disclosure would affect all SEC registrants, the economic implications of the findings are important not only for stockholders, but also for regulators, as they attempt to manage systematic risk and optimize the level of market intervention.

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Economic consequences of SEC regulation pertaining to financial expert definition

Advances in Accounting ◽

10.1016/j.adiac.2016.11.002 ◽

2017 ◽

Vol 36 ◽

pp. 75-86

Author(s):

Steve A. Garner ◽

Paul D. Hutchison ◽

Teresa L. Conover

Keyword(s):

Economic Consequences ◽

Financial Expert ◽

Sec Regulation

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Short Selling and Firms' Disclosure of Bad News: Evidence from Regulation SHO

Journal of Financial Reporting ◽

10.2308/jfir-52401 ◽

2019 ◽

Vol 4 (1) ◽

pp. 1-23 ◽

Cited By ~ 3

Author(s):

Gregory J. Clinch ◽

Wei Li ◽

Yunyan Zhang

Keyword(s):

Stock Prices ◽

Short Selling ◽

Bad News ◽

Good News ◽

Management Forecasts ◽

Timely Manner ◽

Short Sellers ◽

Informed Traders ◽

Sec Regulation ◽

Reputational Costs

As informed traders, short sellers enhance the informativeness of stock prices, especially related to bad news, potentially reducing the benefits and increasing litigation and reputational costs of withholding bad news by managers. We exploit a quasi-natural experimental setting provided by the introduction of SEC regulation SHO (Reg-SHO), which significantly reduced the constraints faced by short sellers for an effectively randomly selected subsample of U.S. firms (pilot firms). Relative to control firms, we find pilot firms increase the likelihood of voluntary bad news management forecasts, provide these forecasts in a more timely manner, and accelerate the release of quarterly bad earnings news. Each of these effects is stronger for subsamples of moderate (compared with extreme) bad news, firms facing high (relative to low) litigation risks, and firms with a forecasting history. Similar effects are not observed for voluntary good news forecasts. A range of robustness tests reinforce our results. JEL Classifications: G14; D22; K22; K41; M40.

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