Throughout the world, private firms are recommended to adopt the same corporate governance rules that are mandatory for public firms. It is unclear, however, whether the high costs associated with such voluntary adoption of corporate governance rules by private firms are justified. A precedent regulation that exists in the Israeli market provides a unique setting for addressing this question. In Israel, since 2011, private companies with public debt (“bond companies”) must act like public firms in adopting corporate governance regulations. We hand-collected a dataset of 105 daily trading Israeli bond companies spanning various industries to test the market reaction to their first-time implementation of governance rules enacted within the framework of Amendment 17 to the Companies Law. The evidence shows an economically significant positive price change of the bond market throughout the milestone of adopting the new regulation. Consistent with this evidence, we also find a positive and significant market reaction to the appointment of outside directors in those companies. Also we find decrease in the bond reaction to control transaction after this Amendment, as compared to similar transactions that were approved before the Amendment. Our findings indicate that applying corporate governance rules raise bondholders' confidence by lowering the risk of the bonds.