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  • The road not taken_Accepted

    Rights statement: This is the peer reviewed version of the following article: Chrisman, J. J., Fang, H., Kotlar, J. and De Massis, A. (2014), A Note on Family Influence and the Adoption of Discontinuous Technologies in Family Firms. Journal of Product Innovation Management. doi: 10.1111/jpim.12206 which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1111/jpim.12206/abstract This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.

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The road not taken: A comparison of Accounting and Auditing Enforcement Releases and securities class actions: A comparison of Accounting and Auditing Enforcement Releases and securities class actions

Research output: Contribution to Journal/MagazineJournal articlepeer-review

<mark>Journal publication date</mark>31/10/2022
<mark>Journal</mark>Journal of Business Finance and Accounting
Issue number9-10
Number of pages41
Pages (from-to)1489-1529
Publication StatusPublished
Early online date19/04/22
<mark>Original language</mark>English


Despite the controversial debate over the role of public enforcement and private litigation in detecting and deterring financial misreporting, we have only scant literature comparing their enforcement outcomes: The Securities and Exchange Commission (SEC)-sanctioned cases (Accounting and Auditing Enforcement Releases [AAERs]) and settled class actions against which the SEC did not file cases (securities class-action lawsuits [SCALs]). This paper documents systematic differences between the two. Specifically, AAERs exhibit a larger magnitude of accruals prior to misreporting, as well as greater financing needs and insider trading during manipulation periods. After controlling for case backlogs in the SEC and the courts, the misreporting amount and period of AAERs are also greater and longer than those of SCALs, although SCALs represent greater settlement amounts. Further analysis indicates that resource constraints do not critically undermine the SEC investigations to detect more material misreporting cases. However, plaintiff investors appear to go forum shopping to earn greater settlement proceeds from SCALs. Finally, relative to SCALs, AAERs experienced significant drops in firm performance, analyst following and CEO tenure around SEC sanctions. Overall, this study provides consistent evidence supporting the SEC's optimization of detection rates under resource constraints and the strategic interaction between SEC enforcement and private litigation.