Regulatory enforcement, foreignness and language negativity: Evidence from SEC comment letters

Koulikidou, Kleopatra; Chantziaras, Antonios; Dedoulis, Emmanouil; Leventis, Stergios

Abstract

In this paper, we demonstrate that negative language is employed as a mechanism through which regulators express their differentiated level of concern and pass on stronger messages to riskier reviewees. We investigate the language tone employed by the internationally-influential U.S. Securities and Exchange Commission (SEC) in comment letters to foreign firms, which are considered riskier in comparison with their U.S. domestic counterparts. We find a significantly greater level of language negativity in comment letters addressed to foreign registrants. We furthershow that the negativity of language is more intense when foreign firms are domiciled in strong-law countries and when they do not apply U.S. GAAP. We offer implications for regulators, managers and market participants.

Citation

Koulikidou, K., Chantziaras, A., Dedoulis, E., & Leventis, S. (2023). Regulatory enforcement, foreignness and language negativity: Evidence from SEC comment letters. Journal of International Accounting, Auditing and Taxation, 51, Article 100547. https://doi.org/10.1016/j.intaccaudtax.2023.100547

• Journal Article Type: Article
• Acceptance Date: Jun 21, 2022
• Online Publication Date: Jun 7, 2023
• Publication Date: 2023-06
• Deposit Date: Jun 21, 2022
• Publicly Available Date: Jun 8, 2025
• Journal: Journal of International Accounting, Auditing and Taxation
• Print ISSN: 1061-9518
• Electronic ISSN: 1879-1603
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 51
• Article Number: 100547
• DOI: https://doi.org/10.1016/j.intaccaudtax.2023.100547
• Public URL: https://durham-repository.worktribe.com/output/1203336