Democratic institutions depend on public confidence to function effectively. Citizens comply with tax laws when they trust the IRS, cooperate with police when they view law enforcement as legitimate, and engage constructively with regulators they perceive as fair and effective. But does this principle extend to financial markets? When retail investors lose confidence in the SEC, do they pull back from trading? When they view the regulator favorably, do they engage more actively? Despite the SEC’s stated mission of protecting investors and maintaining fair, orderly, and efficient markets, we know surprisingly little about whether public perception of the agency actually matters for investor behavior.
Our research asks a fundamental question: Does the public’s perception of the SEC influence their engagement with U.S. financial markets? The answer, we find, is yes.
Source: Why the Public’s Perception of the SEC Matters | CLS Blue Sky Blog