Even if it goes nowhere, an SEC investigation will cost you

Everybody acts differently while they are being watched, especially by those with authority. Whether it’s your boss sitting in the next cubicle next door or a cop car driving behind you, observation leads to behavioral changes. A new paper from Bret Johnson, associate professor of accounting at Costello College of Business George Mason University, finds that large corporate entities are also susceptible to the so-called “regulatory observer effect.” Recently published in Review of Accounting Studies, the paper uncovers how being under SEC investigation likely impacts a company’s behavior, whether or not action is taken against it.

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