SOX, corporate transparency, and the cost of debt

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

doi:10.1016/j.jbankfin.2013.10.001

Cited by 57 publications

(17 citation statements)

References 76 publications

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“…Notice that our results add to the understanding of a specific benefit of the Sarbanes‐Oxley Act. Like Carter () and Andrade et al (), we found a positive effect of SOX on terms of credit. Our model shows that the effect of SOX comes from a reduction in the information asymmetry between borrowers and lenders, mainly through three channels: disclosure, monitoring, and manager punishment.…”

Section: Resultssupporting

confidence: 86%

“…Our paper is closely related to Andrade et al (2014) and Carter (2013). In this study, we contribute to the literature by analyzing the existence of a specific benefit of SOX, isolated from other contemporaneous events, on the terms of debt finance.…”

Section: Introductionmentioning

confidence: 98%

“…Relating SOX and debt, Andrade, Bernille, and Hood () point to a potential relationship between reliability of corporate reporting and cost of debt. The authors found a decrease in the cost of debt, provided by increased corporate transparency perceived by investors.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Corporate Governance and Credit Access in Brazil: The Sarbanes‐Oxley Act as a Natural Experiment

Funchal

Monte-mor

2016

Corporate Governance

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Manuscript Type Empirical Research Question/Issue This study seeks to examine the effect of changes in corporate governance levels on the choice of firms' debt financing in a relevant emerging economy, taking advantage of the Sarbanes‐Oxley Act as a natural experiment. Research Findings/Insights Our empirical method uses an experimental design in which we control for observed and unobserved firm heterogeneity via a difference‐in‐differences estimator. We show that firms subjected to this new regulation, which raised governance requirements, observed a positive effect on their access to the credit market, increasing their total debt significantly, via long‐term and private debt, and reducing the cost of debt, indicating that SOX produced economic gains in this aspect. Theoretical/Academic Implications The main contribution of the present paper is to measure the corporate governance effects on firms' debt financing policies, isolated from other contemporaneous events. Furthermore, we develop a simple theoretical model to help in the understanding of the main sources of SOX's effects. Finally, the natural experimental approach deals with the endogenous relation between corporate governance and firms' choices on debt financing, and presents an alternative to instrumental variables techniques. Practitioner/Policy Implications This paper offers insights to policymakers of emerging economies interested in the development of the credit market. Using laws and regulations like the Sarbanes‐Oxley Act, we show that it is possible to improve firms' governance, with a positive impact on firms' ability to access credit.

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Section: Resultssupporting

confidence: 86%

Section: Introductionmentioning

confidence: 98%

See 1 more Smart Citation

Corporate Governance and Credit Access in Brazil: The Sarbanes‐Oxley Act as a Natural Experiment

Funchal

Monte-mor

2016

Corporate Governance

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“…Indeed, information access and transparency have the ability to decrease the cost of debt (Lu, Chen, and Liao 2010;Andrade, Bernile, and Hood 2014) and the cost of equity (Bhattacharya, Daouk, and Welker 2003;Barth, Konchitchki, and Landsman 2013). On the one hand, the corporation does benefit from disseminating more information to the market to reduce the cost of capital.…”

Section: Information Asymmetrymentioning

confidence: 99%

“…On the one hand, the corporation does benefit from disseminating more information to the market to reduce the cost of capital. Indeed, information access and transparency have the ability to decrease the cost of debt (Lu, Chen, and Liao 2010;Andrade, Bernile, and Hood 2014) and the cost of equity (Bhattacharya, Daouk, and Welker 2003;Barth, Konchitchki, and Landsman 2013). On the other hand, given management's incentive to hide negative information for career concerns, there are reasons to obfuscate and keep information hidden.…”

Section: Information Asymmetrymentioning

confidence: 99%

Marketing Strategy After Meeting Wall Street: The Role of Information Asymmetry

Dewally

Huang

2017

J of Financial Research

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We relate marketing strategy to the initial public offering (IPO) process during 1980–2010. Pre‐IPO marketing intensity provides information to the market, which reduces underpricing and the magnitude of price revisions during the filing period. Firms that experience upward (downward) price revisions spend more (less) on marketing in the five years post‐IPO. We confirm that marketing spending is related to a firm's informational environment by finding a positive relation between marketing intensity and firm information transparency post‐IPO. This finding indicates that marketing spending is one channel through which a firm affects its perception by the public equity market at issuance and later.

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Corporate environmental information disclosure and green innovation: The moderating effect of CEO visibility

Liu

Zhang

Cho

2023

Corp Soc Responsibility Env

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This study investigates the effect of corporate environmental information disclosure (EID) on green innovation in China's heavily polluting industries during 2009–2020 and the moderating effect of Chief Executive Officer (CEO) visibility. The results show that: (1) corporate EID increases green innovation, and CEO visibility strengthens the positive impact of corporate EID on green innovation. (2) The green innovation fostered by EID comes from the leverage effect, not from the crowding‐out effect at the expense of other existing innovations; EID stimulates green innovation by alleviating financing constraints and increasing R&D expenditures. (3) Corporate EID has a greater impact on substantive green innovation than on strategic green innovation, and hard EID makes a more significant contribution to green innovation than soft EID does. (4) State‐owned, large, and established enterprises benefit more from the promotion effect of EID on green innovation as well as the positive moderating effect of CEO visibility.

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SOX, corporate transparency, and the cost of debt

Cited by 57 publications

References 76 publications

Corporate Governance and Credit Access in Brazil: The Sarbanes‐Oxley Act as a Natural Experiment

Corporate Governance and Credit Access in Brazil: The Sarbanes‐Oxley Act as a Natural Experiment

Marketing Strategy After Meeting Wall Street: The Role of Information Asymmetry

Corporate environmental information disclosure and green innovation: The moderating effect of CEO visibility

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