Article
Determinants and Consequences of SEC Comment Letters: A Review*
Valerie Li,
Yan Luo,
Corresponding Author
Valerie Li
San Diego State University
Corresponding author.
Search for more papers by this authorValerie Li,
Yan Luo,
Corresponding Author
Valerie Li
San Diego State University
Corresponding author.
Search for more papers by this authorFirst published: 13 June 2025
*
Accepted by Regan Schmidt. We thank Lori Ryan, Regan Schmidt (the editor), Taekjin Shin, two anonymous reviewers, and participants at the 2023 Corporate Governance Institute Workshop at San Diego State University for helpful comments. On behalf of all authors, the corresponding author states that there is no conflict of interest.
Abstract
enThis paper comprehensively reviews the determinants and consequences of SEC comment letters and provides an up-to-date synthesis of the research in this area. The review identifies the accounting standards, firm characteristics, and management attributes that influence the likelihood of receiving a comment letter and highlights significant gaps in the literature. The study reveals that SEC comment letters can lead to improved financial reporting and disclosure quality by reducing information asymmetry and enhancing stakeholders' decision-making. However, the review also identifies some unintended consequences, including increased insider trading and audit fees. The findings have significant implications for various stakeholders. Regulators can use the insights to conduct more effective and efficient reviews, while practitioners can develop best practices to navigate the SEC comment letter process. The paper identifies future research areas and emphasizes the importance of developing precise measurement instruments to better understand the effects of different types of SEC reviews.
Résumé
frEXAMEN DES DÉTERMINANTS ET DES CONSÉQUENCES DES LETTRES DE COMMENTAIRES DE LA SEC
Le présent article examine en profondeur les déterminants et les conséquences des lettres de commentaires de la SEC et fournit une synthèse à jour de la recherche dans ce domaine. Il présente les normes comptables, les caractéristiques d'entreprises et les attributs de gestion qui ont une incidence sur la probabilité de recevoir une lettre de commentaires, et fait ressortir d'importantes lacunes dans la littérature. L'étude révèle que les lettres de commentaires de la SEC peuvent améliorer la qualité de la préparation et la présentation de l'information financière en réduisant l'asymétrie de l'information et en améliorant le processus décisionnel des parties prenantes. Toutefois, elle dégage également certaines conséquences imprévues, y compris une hausse des délits d'initié et des frais d'audit. Les résultats ont d'importantes conséquences pour diverses parties prenantes. Les organismes de réglementation peuvent utiliser les observations issues de cette étude pour mener des examens plus efficaces et efficients, tandis que les praticiens peuvent mettre au point des pratiques exemplaires pour s'y retrouver dans le processus de traitement des lettres de commentaires de la SEC. L'étude cerne des domaines de recherche à explorer et insiste sur l'importance d'élaborer des instruments de mesure précis pour mieux comprendre les effets des différents types d'examens de la SEC.
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