The Sky Isn't Falling on Wall Street, After All

It wasn't exactly that the British were coming, but more like securities listings were going -- to London, to escape the costs of complying with the 2002 Sarbanes-Oxley corporate governance law.

That, at least, was the story line put forth in a coordinated assault by corporate America, compliant politicians and business groups. But that assault was undercut with resolutely cheery news on the securities and bond issues for the first quarter of this year.

The Securities Industry and Financial Markets Association, in its report for the first three months of 2007, said that new securities issuance rose to $1.78 trillion, up 13 percent compared to the first quarter of 2006.

There was also no indication that shareholder suits or even overzealous prosecutors were undermining the market with Sifma's findings that corporate bond issuance soared to a record $308 billion, up 23.6 percent compared to the same period last year.

Driven by mergers and acquisitions and by leveraged buyouts, the industry association's report said total bond issuance for 2007 may reach last year's record of $1 trillion.

Total equity underwriting of common and preferred stock jumped 42.6 percent, to $61.4 billion, over the same period last year. The amount involved 202 deals. The total dollar amount was slightly less than the $61.7 billion in the last quarter of 2006, but it marked the first time $60 billion of equity was raised in consecutive quarters in almost seven years, according to the Sifma report.

The report seems to bolster the findings of a new study on financial market competitiveness, by three finance professors who examined whether Sarbanes-Oxley had driven securities issuances across the pond.

Despite oft-aired concerns that the law's paperwork and bureaucracy have burdened companies, the report, by the National Bureau of Economic Research, found that that the New York exchanges had not suffered from it and, in fact, the law had no negative effect on the markets.

Instead, the current regulatory situation means there is a "distinct governance benefit for firms that list on the U.S. exchanges," concluded authors Craig Doidge, G. Andrew Karolyi, and Rene M. Stulz in their report, "Has New York Become Less Competitive in Global Markets?"

Based on the good news avalanche in the securities industry, it would be hard to single out Sarbanes-Oxley, which the association says made securities companies' compliance costs double in three years to $25.5 billion.

In fact, the association expects the good times will continue to roll. Michael Decker, senior managing director at SIFMA, noted that the "interest rate environment is stable, the economy continues to grow, and corporate profit growth is still on track."

by Elizabeth Olson