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Article: Auditor independence and the cost of capital before and after Sarbanes-Oxley: The case of newly issued public debt
Title | Auditor independence and the cost of capital before and after Sarbanes-Oxley: The case of newly issued public debt |
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Authors | |
Issue Date | 2010 |
Publisher | Routledge. The Journal's web site is located at http://www.tandf.co.uk/journals/titles/09638180.asp |
Citation | European Accounting Review, 2010, v. 19 n. 4, p. 633-664 How to Cite? |
Abstract | An important aim of the Sarbanes-Oxley Act (SOX) was to reduce the cost of capital by enhancing auditor independence. However, prior literature has argued that SOX has been ineffective in meeting this objective. We contribute to this debate by first providing evidence suggesting that auditor independence has increased following SOX. Though we posit an inverse relationship between auditor independence and cost of capital, it is an open question whether this relationship has become stronger or weaker following SOX. An examination of this relationship reveals that auditor independence is more strongly related to bond rating and bond yield premium in the post-SOX period relative to the period before SOX. This evidence suggests greater price sensitivity of corporate debt to the level of auditor independence following SOX. We also show that controlling for the effect of auditor independence and other factors, cost of debt decreased following SOX. © 2010 European Accounting Association. |
Persistent Identifier | http://hdl.handle.net/10722/137599 |
ISSN | 2023 Impact Factor: 2.5 2023 SCImago Journal Rankings: 1.264 |
SSRN | |
ISI Accession Number ID | |
References |
DC Field | Value | Language |
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dc.contributor.author | Amir, E | en_HK |
dc.contributor.author | Guan, Y | en_HK |
dc.contributor.author | Livne, G | en_HK |
dc.date.accessioned | 2011-08-26T14:28:41Z | - |
dc.date.available | 2011-08-26T14:28:41Z | - |
dc.date.issued | 2010 | en_HK |
dc.identifier.citation | European Accounting Review, 2010, v. 19 n. 4, p. 633-664 | en_HK |
dc.identifier.issn | 0963-8180 | en_HK |
dc.identifier.uri | http://hdl.handle.net/10722/137599 | - |
dc.description.abstract | An important aim of the Sarbanes-Oxley Act (SOX) was to reduce the cost of capital by enhancing auditor independence. However, prior literature has argued that SOX has been ineffective in meeting this objective. We contribute to this debate by first providing evidence suggesting that auditor independence has increased following SOX. Though we posit an inverse relationship between auditor independence and cost of capital, it is an open question whether this relationship has become stronger or weaker following SOX. An examination of this relationship reveals that auditor independence is more strongly related to bond rating and bond yield premium in the post-SOX period relative to the period before SOX. This evidence suggests greater price sensitivity of corporate debt to the level of auditor independence following SOX. We also show that controlling for the effect of auditor independence and other factors, cost of debt decreased following SOX. © 2010 European Accounting Association. | en_HK |
dc.language | eng | en_US |
dc.publisher | Routledge. The Journal's web site is located at http://www.tandf.co.uk/journals/titles/09638180.asp | en_HK |
dc.relation.ispartof | European Accounting Review | en_HK |
dc.rights | This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. | - |
dc.rights | This is an Author's Original Manuscript of an article published by Taylor & Francis Group in [European Accounting Review] on [2010], available online: http://www.tandfonline.com/doi/abs/10.1080/09638180903503986 | - |
dc.title | Auditor independence and the cost of capital before and after Sarbanes-Oxley: The case of newly issued public debt | en_HK |
dc.type | Article | en_HK |
dc.identifier.email | Guan, Y: ylguan@hkucc.hku.hk | en_HK |
dc.identifier.authority | Guan, Y=rp01064 | en_HK |
dc.description.nature | preprint | - |
dc.identifier.doi | 10.1080/09638180903503986 | en_HK |
dc.identifier.scopus | eid_2-s2.0-78649418524 | en_HK |
dc.identifier.hkuros | 190127 | en_US |
dc.relation.references | http://www.scopus.com/mlt/select.url?eid=2-s2.0-78649418524&selection=ref&src=s&origin=recordpage | en_HK |
dc.identifier.volume | 19 | en_HK |
dc.identifier.issue | 4 | en_HK |
dc.identifier.spage | 633 | en_HK |
dc.identifier.epage | 664 | en_HK |
dc.identifier.eissn | 1468-4497 | - |
dc.identifier.isi | WOS:000284413200001 | - |
dc.publisher.place | United Kingdom | en_HK |
dc.identifier.ssrn | 781844 | - |
dc.identifier.scopusauthorid | Amir, E=7004440694 | en_HK |
dc.identifier.scopusauthorid | Guan, Y=16024282900 | en_HK |
dc.identifier.scopusauthorid | Livne, G=16024806800 | en_HK |
dc.identifier.issnl | 0963-8180 | - |