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The purpose of this paper is to investigate the role of social capital in the issuances of Rule 144A debt. Using a sample of 1,378 debt offerings from 1997 to 2015 in the US, this paper provides empirical evidence on whether and to what extent social capital affects the cost of Rule 144A debt.

This paper employs a county-level measure of social capital and links social capital to the yield spreads of Rule 144A debt. A Heckman selection model is sued to address the sample selection bias, and an instrumental variable approach and propensity score matching methodology are implemented to deal with the potential endogeneity issue. The authors check for robustness using an alternative measure of social capital.

The results of the analysis provide evidence that issuers headquartered in the counties with higher levels of social capital experience lower yield spreads in their Rule 144A debt offerings. The findings are robust to a Heckman selection model, an instrumental variable approach and propensity score matching. Furthermore, the analysis reveals the marginal effect of social capital that the effect of social capital is more pronounced for the issuing firms with higher agency cost of debt and lower institutional ownership. The effect of social capital is more prominent after financial crisis.

This paper provides novel evidence of the effect of social capital on the cost of privately placed debt. The issuances of Rule 144A debt are subject to significant information asymmetry and are targeted at sophisticated institutional investors. This paper sheds further light on how institutional investors incorporate the regional social capital in their pricing scheme of private placement of Rule 144A debt.

The private placement is the principal alternative method of financing to an SEC registered offering. The private placement avoids registration under the Securities Act of 1933 (the “Securities Act”) with its concomitant costs and delays. It also avoids periodic reporting under the Securities Exchange Act of 1934 (the “Exchange Act”) for foreign private issuers. Issuers frequently resell their private placement securities abroad or to other qualified institutional investors. The combination of statutory exemptions, Rule 144A, Regulation S, and other SEC initiatives enable issuers to take advantage of these benefits

The purpose of this paper is to empirically test information asymmetry and agency conflicts hypotheses, as to firm's choices in selling preferred stock in public and private markets.

Using firm‐level preferred stock issue data, the author uses a multivariate logistic model to see a firm's different preferred stock selling decisions among public market, rule 144A market, and non rule 144A market. The paper examines the impact of the firm's idiosyncratic risk and cash flow volatility.

It is found that private placement (non rule 144A) firms have higher information asymmetry than public offering firms. In addition, private placement (rule 144A) firms have higher operating risk than public offering firms. The non Rule 144A market and rule 144A market for preferred stocks are significantly different.

This topic can be further studied with more detailed, preferred stock issue data.

The paper extends our understanding of the preferred stock market selling mechanism.

To explain the SEC's new Compliance and Disclosure Interpretations (“CDIs”) relating to the recently adopted amendments to Rule 144A and Rule 506, which permitted general solicitation and general advertising (“general solicitation”) in all Rule 144A offerings and select Regulation D offerings under Rule 506.

The article summarizes amended rules and recently issued CDIs, while also explaining some of their implications.

The new CDIs provide a number of helpful clarifications and confirmations on aspects of the amended rules relating to general solicitation, transitioning between different types of Rule 506 offerings and investor verification under Rule 506(c).

Practical summary of recent SEC guidance with explanation from seasoned corporate securities attorneys.

The purpose of this paper is to explain changes to the SEC rules governing private offerings of securities, permitting general solicitation and general advertising in certain private placements conducted under Rule 506 of Regulation D under the US Securities Act of 1933, and amending Rule 506 to disqualify certain “bad actors” from private placements conducted under the rule.

The paper explains the new Rule 506(c), which removes the prohibition on general solicitation and general advertising provided that all purchasers are accredited investors and the issuer has taken all reasonable steps to verify that they are accredited investors. The paper explains the final rules relating to bad-actor disqualifications, and also explains several amendments to Regulation D that the SEC has proposed to give the Commission additional insight into the market and help prevent potential fraud.

In adopting these rule amendments simultaneously, the SEC balanced the often counterpoised considerations of promoting capital formation and protecting investors.

Issuers engaging in offerings under the new Rule 506(c) must develop adequate processes to verify the accredited investor status of purchasers and to identify bad actors as defined in the rule.

The paper provides practical guidance from experienced financial services lawyers.

This paper aims to investigate how firms from emerging economies choose among different international bond markets: global, US144A and Eurobond markets. The authors explore if the ranking in regulatory stringency –global bonds have the most stringent regulations and Eurobonds have the most lenient regulations – leads to a segmentation of borrowers.

The authors use a novel data set from emerging economy firms, treating them as consolidated entities. The authors also obtain descriptive evidence and perform univariate non-parametric analyses, conditional and multinomial logit analyses to study firms’ marginal debt choice decisions.

The authors show that firms with poorer credit quality, less ability to absorb flotation costs and more informational asymmetries issue debt in US144A and Eurobond markets. On the contrary, firms issuing global bonds – subject to full Securities and Exchange Commission requirements – are financially sounder and larger. This exercise also shows that following the global crisis, firms from emerging economies are more likely to tap less regulated debt markets.

This is, to the authors’ knowledge, the first study that examines if the ranking in stringency of regulation – global bonds have the most stringent regulations and Eurobonds have the most lenient regulations – is consistent with an ordinal choice by firms. The authors also explore if this ranking is monotonic in all determinants or there are firm-specific features which make firms unlikely to borrow in a given market. Finally, the authors analyze if there are any changes in the debt-choice behavior of firms after the global financial crisis.

To summarize changes to the communication, registration, and offering process under the Securities Act of 1933 as adopted by the Securities and Exchange Commission on June 29, 2005 – three changes that will modify and significantly enhance the communication, registration, and offering process under the Securities Act of 1933, which according to the Commission are intended to eliminate “unnecessary and outmoded restrictions” on registered offerings. This article highlights the key provisions contained in the new rule release that are likely to affect the conduct of registered offerings.

Discusses benefits of automatic shelf registration, new provisions that will liberalize written communications before and during registered securities offerings, new disclosure liability rules, a new “access equals delivery” model, a separate requirement that investors be notified that they have purchased securities in a registered offering, a provision that allows reporting issuers to incorporate by reference previously filed Exchange Act reports into a Securities Act registration statement, a slight expansion of safe harbors available for broker‐dealers to publish research that constitutes an offer around the time of a registered offering, and changes in Exchange Act report disclosure.

The Securities and Exchange Commission intends the new rules to make the make the communication, registration, and offering process under the Securities Act of 1933 more efficient and to eliminate unnecessary and outmoded restrictions on registered offerings.

A practical guide to the new communication, registration, and offering rules.

Within the past few years, a new phenomenon has taken place among the world's leading microfinance institutions (MFIs) – entry into new capital markets through initial public offerings (IPOs). “Going public” launches MFIs into a new frontier, not only presenting challenges but also providing new opportunities for the institutions and the clients they serve.

Liability of foreignness (LOF) has been one of the central constructs in the field of international business and management. Over the past two decades, a significant body of theoretical and empirical research has accumulated, theorizing on the sources of these LOFs, investigating their magnitude, and prescribing approaches to mitigate these disadvantages. However, much of this research is almost exclusively related to firms expanding their products, services, and operations to other countries as part of their global expansion. The difficulties firms face in foreign product markets is just one dimension of the costs they can face in their attempts to secure resources abroad.

We expand the domain of the LOF construct to include liabilities faced by firms accessing foreign capital markets in light of the increasing integration of capital markets. We identify four sources of LOF in capital markets: regulatory costs, information costs, unfamiliarity costs, and costs arising out of cultural differences. Based on an extensive review of “home bias” in equity markets, we propose four strategies to erase the legitimacy deficits that firms encounter in foreign capital markets: bonding, signaling, adoption of business practices isomorphic with the host country, and certifications and endorsements by third parties. We also offer suggestions for operationalizing and measuring LOF in capital markets as well as several directions for advancing further research on LOF in the context of capital markets.