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The JOBS Act and Information Uncertainty in IPO Firms

65 Pages Posted: 15 Jul 2014 Last revised: 15 Feb 2017

Mary E. Barth

Stanford University - Graduate School of Business

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School

Daniel J. Taylor

University of Pennsylvania - The Wharton School

Date Written: January 1, 2017

Abstract

This study examines the effect of the Jumpstart Our Business Startups Act (JOBS Act) on information uncertainty in IPO firms. The JOBS Act creates a new category of issuer, the Emerging Growth Company (EGC), and exempts EGCs from several disclosures required for non-EGCs. Our findings are consistent with proprietary cost concerns motivating EGCs to eliminate some of the previously mandatory disclosures, which increases information uncertainty in the IPO market, attracts investors who rely more on private information, and leads EGCs to provide additional post-IPO disclosures to mitigate the increased information uncertainty. Our results also are consistent with agency explanations, whereby EGCs exploit the JOBS Act provisions to avoid compensation related disclosures, which results in larger IPO underpricing for such firms. Overall, we provide evidence on how reduced mandatory disclosure affects the IPO market.

Keywords: JOBS Act, mandatory disclosure, voluntary disclosure, proprietary costs, information uncertainty, underpricing, volatility

JEL Classification: D8, G14, G18, G32, M41

Suggested Citation

Barth, Mary E. and Landsman, Wayne R. and Taylor, Daniel J., The JOBS Act and Information Uncertainty in IPO Firms (January 1, 2017). Accounting Review, Forthcoming; Stanford University Graduate School of Business Research Paper No. 14-26. Available at SSRN: https://ssrn.com/abstract=2465927 or http://dx.doi.org/10.2139/ssrn.2465927

Mary Barth (Contact Author)

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-9040 (Phone)
650-725-0468 (Fax)

Wayne Landsman

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-3221 (Phone)
919-962-4727 (Fax)

Daniel Taylor

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

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