VTechWorks staff will be away for the winter holidays starting Tuesday, December 24, 2024, through Wednesday, January 1, 2025, and will not be replying to requests during this time. Thank you for your patience, and happy holidays!
Scholarly Works, Accounting and Information Systems
Prior research on SEC comment letters has almost exclusively focused on reviews of periodic filings, such as 10-Ks. Transactional filing reviews, such as those related to mergers and acquisitions (M&A), are a fundamental priority of the SEC and to which it dedicates significant resources. We help fill the void in the literature by examining the influence of SEC comment letters on one type of transactional filing, Form S-4, on the accounting quality of the newly merged entity. We find that S-4s that receive an SEC comment letter are less likely to have a restatement or a goodwill impairment after the M&A deal is completed. Our inferences remain the same using either an entropy-balanced sample or a propensity-score-matched sample based on firm and deal characteristics. These results are stronger for S-4 comment letters with higher intensity and M&A- specific comments. Finally, to explore plausible mechanisms and provide further context, we examine specific disclosure changes in S-4 amendments filed during the filing review process and find evidence that the improved M&A accounting quality is related to revisions to the pro forma financial statements, the total purchase price, and goodwill allocations. Overall, our findings provide evidence on the effectiveness of the SEC’s comment letter process related to M&A deals.