The Debt-Equity Choice When Regulatory Thresholds are Based on Equity Values: Evidence from SOX 404
研究发现，当股权市值较大导致企业面临昂贵监管时，企业会转向债务融资而非股权融资。利用SOX法案404条款对小公司的豁免门槛，通过双重差分法证实，门槛附近的企业在法案后更倾向于发债、减少发股并提高杠杆率，以维持豁免资格。
ABSTRACT When larger market values of equity result in being subject to costly regulation, firms have incentives to shift their sources of financing toward debt and away from equity. We use the Sarbanes-Oxley Act of 2002 (SOX) as a setting to provide evidence of such incentives. Smaller firms were granted several reprieves and eventually exempted from the internal control audit requirements of SOX Section 404, which many consider the most costly and onerous aspect of SOX. Using a difference-in-differences design, we show that relative to control firms, firms just below the regulatory threshold have increased propensities to issue debt, decreased propensities to issue equity, and increased leverage levels in the post-SOX period. These results are consistent with firms altering their financing choices to maintain their exempt status and demonstrate an economic consequence of regulatory regimes that are tiered by equity values.