The Sarbanes-Oxley Act and the Choice of Bond Market by Foreign Firms

Journal of Accounting Research, Forthcoming

47 Pages Posted: 28 Mar 2011

See all articles by Yu Gao

Yu Gao

University of St Thomas, Opus College of Business

Date Written: March 22, 2011

Abstract

This paper examines the economic impact of the Sarbanes-Oxley Act (SOX) by studying foreign firms’ choice of whether to issue bonds in the U.S. public bond market or elsewhere before and after the law’s enactment in 2002. After controlling for firm characteristics, bond features, home-country attributes, and market conditions, I find that foreign firms rely less on the U.S. public bond market after SOX. Additionally, some determinants of choosing the U.S. public bond market have changed since the passage of SOX: firms listing equities on U.S. stock exchanges, adopting IFRS, and doing large bond issuances are more likely to choose this market in the post-SOX period than in the pre-SOX period. Overall, these results are consistent with a shift in the expected costs and benefits of choosing the U.S. public bond market following SOX. This paper provides the first evidence about how SOX influences debt financing decisions and alters capital flows across international bond markets.

Keywords: The Sarbanes-Oxley Act (SOX), The Yankee Bond Market, The Eurodollar Bond Market, The Rule 144A Bond Market

JEL Classification: M41

Suggested Citation

Gao, Yu, The Sarbanes-Oxley Act and the Choice of Bond Market by Foreign Firms (March 22, 2011). Journal of Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1792963

Yu Gao (Contact Author)

University of St Thomas, Opus College of Business ( email )

1000 Lasalle Ave
Minneapolis, MN 55403
United States

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