Economic Consequences of SEC Regulation for Iran-related Disclosure

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Zare Bidaki, Mohsen | 2022

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Type of Document: M.Sc. Thesis
Language: English
Document No: 55368 (44)
University: Sharif University of Technology
Department: Management and Economics
Advisor(s): Fatemi Ardestani, Farshad; Rastad, Mahdi
Abstract:
We examine the economic implications of the SEC disclosure rules for companies doing business with Iran on their riskiness of debt. We exploit Section 219 of the Iran Threat Reduction and Syria Human Rights Act (ITRA), which requires companies listed on U.S exchanges to disclose their activities and transactions with Iranian institutions. We analyze the impact of the first ITRA disclosure on the cost of capital for both American and foreign companies listed on the US exchanges. Using a difference-in-difference approach, we document a negative impact of ITRA disclosures on loan spread and credit rating of foreign companies. Further, using textual analysis, we identify the elements in the content of ITRA disclosures that are connected to the increase in the risk of debt. We provide evidence that shows the negative impact is more sever for firms that are planning on continuing their activities with Iranian but less sever for those mention that they had government permissions for their activities
Keywords:
Event Study ; Capital Cost ; Financial Reporting Regulation for Foreign Policy Objectives ; Debtholders’ Reactions ; Iran Threat Reduction and Syria Human Rights Act (ITRA) ; United States ; Secrities

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