SOX, Corporate Transparency, and the Cost of Debt

Andrade, Sandro C.; Bernile, Gennaro; Hood, Frederick

doi:10.2139/ssrn.1257002

Cited by 22 publications

(23 citation statements)

References 81 publications

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“…First, to our knowledge, this paper is the first to document that media coverage can exert a significant economic impact on debt offerings. Our finding is consistent with several recent studies, which suggest that an improvement in the firm's information environment decreases credit spreads (see Andrade, Bernile, and Hood (2014), Cassar, Ittner, and Cavalluzzo (2014)).…”

Section: Introductionsupporting

confidence: 93%

Media Coverage and the Cost of Debt

Gao¹,

Wang²,

Wang³

et al. 2019

J. Financ. Quant. Anal.

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This paper investigates the relation between media coverage and offering yield spreads using a comprehensive dataset of 5,338 industrial bonds issued from 1990 to 2011. We find that media coverage is negatively associated with firms’ cost of debt. This association is robust to controlling for standard yield determinants, different model specifications, and endogeneity. We identify 4 economic channels through which media coverage influences the cost of debt: Information asymmetry, governance, liquidity, and default risk. Importantly, media coverage has an independent influence beyond the effects of these economic mechanisms and is not a proxy for other firm attributes.

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Section: Introductionsupporting

confidence: 93%

Media Coverage and the Cost of Debt

Gao¹,

Wang²,

Wang³

et al. 2019

J. Financ. Quant. Anal.

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“…Similarly, firms with stock trading in the U.S. OTC markets tend to issue more bonds (primarily before SOX), but the OTC coefficient is smaller in magnitude and statistical significance across all models. The rank ordering of the three ADR variables is 14 Consistent with this argument, Andrade et al (2014) find that SOX is associated with a significant decrease in the cost of debt mainly due to an increase in corporate transparency. consistent with exchange-listings conferring the largest monitoring, transparency, and visibility benefits to bond-issuing firms.…”

Section: Propensity Of Bond Financing Analysesmentioning

confidence: 64%

Equity cross-listings in the U.S. and the price of debt

2017

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Using a large panel from 46 countries over 20 years, we find that non-U.S. firms issue corporate bonds more frequently and at lower offering yields following an equity cross-listing on a U.S. exchange. Firms issue more bonds through public offerings instead of private placements and in foreign markets rather than at home, in both cases at significantly lower yields. Moreover, the debt-related benefits are concentrated among firms domiciled in countries with less private benefits of control, efficient debt enforcement, and developed bond markets, suggesting that equity cross-listings cannot completely offset the impact of weak home country institutions. The results support the notion that the monitoring, transparency, and visibility benefits brought about by equity cross-listings on U.S. exchanges are valuable to bond investors. JEL classification: F34, G12, G15, G38, K22

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“…Transparency risk covers more than accounting imprecision, however, and may relate to additional factors such as dealer operations, regulatory supervision, information collected to monitor possible systemic risk and price transparency for non‐dealers, such as whether the OTC dealer‐quoted prices are based on fresh trades or dealer consensus. Changes in these factors through self‐regulation could influence CDS spreads, as could changes in accounting regulations and disclosure quality, such as the Sarbanes‐Oxley Act of 2002 (Andrade et al ., ). Also, there still remains intransparency for outside investors regarding the identity of counterparties.…”

Section: Cds Contracts and Institutional Backgroundmentioning

confidence: 97%

The market for credit default swaps: new insights into investors' use of accounting information?

Griffin

2014

Accounting & Finance

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The market for credit default swaps has developed into a well-functioning, global multi-trillion dollar market, wherein investors price and transfer corporate financial instruments on the basis of credit risk. This paper first summarizes the structure and growth of the market. Next, I introduce theory and evidence on how investors price credits risk and explain how the quality of financial statement information plays a unique role in the determination of credit spread. I then review the nascent empirical accounting literature on this topic. This review sheds light on several accounting research questions that might be understood better in the setting of the credit default swap market. The final section summarizes suggestions for future work.

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SOX, Corporate Transparency, and the Cost of Debt

Cited by 22 publications

References 81 publications

Media Coverage and the Cost of Debt

Media Coverage and the Cost of Debt

Equity cross-listings in the U.S. and the price of debt

The market for credit default swaps: new insights into investors' use of accounting information?

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