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Bret Johnson, an associate professor within the Accounting Area, recently had accepted for publication an article entitled "Protecting Wall Street or Main Street: SEC Monitoring and Enforcement of Retail-Owned Firms" in Review of Accounting Studies.
This study examines whether retail ownership of a firm is associated with the likelihood that the firm is subject to monitoring and enforcement by the two largest divisions of the SEC. Monitoring is a form of ex-ante or preventative regulatory oversight, while enforcement is an ex-post or punitive form of oversight related to financial reporting regulation. We find a negative association between retail ownership and SEC monitoring. In contrast, we find a positive association between retail ownership and SEC enforcement. These results suggest that the SEC is less likely to monitor firms with high retail ownership, potentially leaving current retail investors more vulnerable to unresolved financial reporting issues. Additionally, the SEC is more likely to initiate enforcement actions on firms with high retail ownership, imposing costs on current retail investors when the firm is accused of egregious cases of perceived financial misreporting.