Date of Award

Summer 8-15-2021

Author's School

Graduate School of Arts and Sciences

Author's Department

Business Administration

Degree Name

Doctor of Philosophy (PhD)

Degree Type



This dissertation is comprised of three essays relating to SEC enforcement, reporting of price-to-earnings ratios, and working-capital accruals. The first essay examines court efficiency and Securities and Exchange Commission (SEC) enforcement. The SEC, constrained by limited resources, is compelled to select enforcement actions to limit enforcement costs. In this paper, I examine whether the efficiency of federal district courts affects the likelihood of the SEC initiating an enforcement action (i.e., civil actions). I proxy for court efficiency using the number of days between the case’s filing and termination, the proportion of months with vacant judges, the case backlog per judge, and a composite score of all three court efficiency measures using the principal factor analysis. I find a significantly negative relation between the court efficiency measures and the SEC enforcement likelihood. Further, I use judicial vacancy as an exogenous shock to court efficiency and find that judicial vacancy has a stronger effect on the SEC enforcement likelihood in courts with fewer judgeships or more productive outgoing judges. Lastly, I find that the efficiency of federal district courts is associated with restatement likelihood because of firms’ perceived costs of SEC enforcement. The results provide evidence that the federal judicial system is an important factor for the SEC enforcement likelihood and the capital market.

The second essay aims to understand the effects of the initial reporting of price-to-earnings (PE) ratios in The Wall Street Journal’s stock exchange tables. We find a significantly negative (positive) stock-price reaction for high (low) PE firms. After this event, a greater percentage of high PE firms report earnings increases. Increases in noncash working-capital accruals are positively associated with firms’ PE rankings. We also find an average increase in the earnings response coefficient for high PE firms after the event. These results are consistent with PE disclosure decreasing investors’ information processing costs and increasing attention to earnings by both investors and managers.

Lastly, the third essay aims to understand the empirical strength of the relation between working-capital accruals and investment and financing activities. Using the approach common in financial-statement-analysis texts, we model accruals (i.e., investment in working capital) as a function of sales and predicted working-capital efficiency (i.e., turnover). We build a model for predicted current-period working-capital efficiency based on investment and financing factors. Our results confirm that investment factors correlate with a firm’s working-capital efficiency, but we get limited results on the financing factors. We find that incorporating expected working-capital efficiency and its interaction with sales significantly improves the explanatory power of accrual models. We further find that the model incorporating these variables does better than other models in predicting future operating income or cash flows and detecting earnings management in AAER firms.


English (en)

Chair and Committee

Xiumin Martin

Committee Members

Kimball L. Chapman, Richard M. Frankel, Jared N. Jennings, Yan Sun,

Available for download on Monday, August 19, 2041

Included in

Accounting Commons