Managers’ Private Communications with Analysts: The Effect of SEC v. Siebel Systems Inc.

53 Pages Posted: 26 Aug 2019 Last revised: 17 Feb 2023

See all articles by Ashiq Ali

Ashiq Ali

University of Texas at Dallas - Naveen Jindal School of Management

Michael T. Durney

University of Iowa

Jill E. Fisch

University of Pennsylvania Carey Law School; European Corporate Governance Institute (ECGI)

Hoyoun Kyung

University of Missouri at Columbia - Robert J. Trulaske, Sr. College of Business

Date Written: January 31, 2023

Abstract

In 2005, the SEC suffered a high-profile loss in its first court case, SEC v. Siebel Systems Inc., in effort to enforce Regulation Fair Disclosure (Reg FD). We examine the impact of this loss on managers’ selective disclosure to sell-side analysts. Using a variety of tests, we provide evidence that the information content of analyst reports increased after the Siebel decision, especially for observable instances of private meetings. This finding suggests that such selective disclosure increased significantly after the court’s decision. Our results also suggest that the increased selective disclosure faded as the SEC resumed enforcement actions related to Reg FD in 2009. In exploratory analyses, we survey and interview law firm partners to investigate possible mechanisms for our results; their responses suggest that the Siebel outcome reduced manager concern about liability from selective disclosure. Collectively, our results highlight how the anticipated costs of regulatory enforcement affect private information flow from managers to analysts in particular.

Keywords: Corporate Disclosure Regulation, Managers’ Private Communications, SEC Enforcement Threat, Siebel Systems Case, Regulation Fair Disclosure

JEL Classification: M40, M48, K22, K42

Suggested Citation

Ali, Ashiq and Durney, Michael Thomas and Fisch, Jill E. and Kyung, Hoyoun, Managers’ Private Communications with Analysts: The Effect of SEC v. Siebel Systems Inc. (January 31, 2023). Contemporary Accounting Research, Forthcoming, European Corporate Governance Institute – Finance Working Paper No. 635/2019, U of Penn, Inst for Law & Econ Research Paper No. 20-46, Available at SSRN: https://ssrn.com/abstract=3440852 or http://dx.doi.org/10.2139/ssrn.3440852

Ashiq Ali

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 West Campbell Road, SM41
Richardson, TX 75080-3021
United States
972-883-6360 (Phone)
972-883-6811 (Fax)

HOME PAGE: http://https://jindal.utdallas.edu/faculty/ashiq-ali

Michael Thomas Durney

University of Iowa ( email )

341 Schaeffer Hall
Iowa City, IA 52242-1097
United States

Jill E. Fisch

University of Pennsylvania Carey Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
215-746-3454 (Phone)
215-573-2025 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Hoyoun Kyung (Contact Author)

University of Missouri at Columbia - Robert J. Trulaske, Sr. College of Business ( email )

344 Cornell Hall
Columbia, MO 65211
United States

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