Workshop’s Topic: This study investigates how SEC-connected directors influence the likelihood of regulatory investigations following potential corporate misconduct. Using a sample of firms that announce financial restatements, we find that firms with SEC-connected independent directors are more likely to be investigated by the SEC. However, we do not observe the same effect for SEC-connected executive directors or independent directors with SEC connections in regions outside the firm’s primary regulatory jurisdiction. Additionally, while SEC-connected independent directors are associated with a higher likelihood of an SEC investigation, they are not linked to a greater probability of receiving penalties in the form of AAERs. Further analysis shows that firms with SEC-connected independent directors experience fewer internal control weaknesses and improved financial reporting quality after the investigation. Moreover, these directors hold more board positions in publicly listed companies following the investigation. Overall, our findings suggest that the SEC connections of independent directors enhance oversight effectiveness during investigations but also help mitigate severe penalties, leading to improved governance and career outcomes for the directors.

Time and Location: 10:00 AM (GMT+8), Room A423 (School of Management)

Language: Bilingual (Chinese and English)