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The spillover effect of U.S. stock market regulation on global entrepreneurship: Evidence from the Sarbanes-Oxley Act

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  • Gao, Huasheng
  • Wang, Yuxi

Abstract

We examine how U.S. securities regulation spills over internationally through cross-border capital market integration to shape global entrepreneurship. Exploiting the Sarbanes–Oxley Act (SOX) as an exogenous increase in U.S. listing and compliance costs, we show that entrepreneurial activity declines significantly in countries that are more reliant on U.S. capital markets, relative to less-exposed countries. We identify an exit-based mechanism: higher IPO exit costs reduce venture-capital investment, which in turn depresses startup formation. Our findings reveal entrepreneurial entry as a real-economy margin of financial integration and highlight unintended global consequences of U.S. securities regulation.

Suggested Citation

  • Gao, Huasheng & Wang, Yuxi, 2026. "The spillover effect of U.S. stock market regulation on global entrepreneurship: Evidence from the Sarbanes-Oxley Act," Finance Research Letters, Elsevier, vol. 102(C).
    • Handle: RePEc:eee:finlet:v:102:y:2026:i:c:s1544612326005805
    DOI: 10.1016/j.frl.2026.110051
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    Keywords

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    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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