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Article: Auditor independence and the cost of capital before and after Sarbanes-Oxley: The case of newly issued public debt

TitleAuditor independence and the cost of capital before and after Sarbanes-Oxley: The case of newly issued public debt
Authors
Issue Date2010
PublisherRoutledge. 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?
AbstractAn 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 Identifierhttp://hdl.handle.net/10722/137599
ISSN
2015 Impact Factor: 1.098
2015 SCImago Journal Rankings: 0.828
SSRN
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorAmir, Een_HK
dc.contributor.authorGuan, Yen_HK
dc.contributor.authorLivne, Gen_HK
dc.date.accessioned2011-08-26T14:28:41Z-
dc.date.available2011-08-26T14:28:41Z-
dc.date.issued2010en_HK
dc.identifier.citationEuropean Accounting Review, 2010, v. 19 n. 4, p. 633-664en_HK
dc.identifier.issn0963-8180en_HK
dc.identifier.urihttp://hdl.handle.net/10722/137599-
dc.description.abstractAn 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.languageengen_US
dc.publisherRoutledge. The Journal's web site is located at http://www.tandf.co.uk/journals/titles/09638180.aspen_HK
dc.relation.ispartofEuropean Accounting Reviewen_HK
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.rightsThis 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.titleAuditor independence and the cost of capital before and after Sarbanes-Oxley: The case of newly issued public debten_HK
dc.typeArticleen_HK
dc.identifier.emailGuan, Y: ylguan@hkucc.hku.hken_HK
dc.identifier.authorityGuan, Y=rp01064en_HK
dc.description.naturepreprint-
dc.identifier.doi10.1080/09638180903503986en_HK
dc.identifier.scopuseid_2-s2.0-78649418524en_HK
dc.identifier.hkuros190127en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-78649418524&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume19en_HK
dc.identifier.issue4en_HK
dc.identifier.spage633en_HK
dc.identifier.epage664en_HK
dc.identifier.eissn1468-4497-
dc.identifier.isiWOS:000284413200001-
dc.publisher.placeUnited Kingdomen_HK
dc.identifier.ssrn781844-
dc.identifier.scopusauthoridAmir, E=7004440694en_HK
dc.identifier.scopusauthoridGuan, Y=16024282900en_HK
dc.identifier.scopusauthoridLivne, G=16024806800en_HK

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