The Effects of Removing Barriers to Equity Issuance

49 Pages Posted: 15 Jan 2015 Last revised: 23 Jul 2016

See all articles by Matthew Gustafson

Matthew Gustafson

Pennsylvania State University - Smeal College of Business

Peter Iliev

Pennsylvania State University - Department of Finance

Date Written: July 2016

Abstract

We study the consequences of a U.S. deregulation allowing small firms to accelerate their public equity issuance. Post-deregulation, affected firms double their reliance on public equity and transition away from private investments in public equity compared to similar untreated firms. The net effect is a 5.7 percentage point or 49% increase in the annual probability of raising equity. This is accompanied by a reduction in equity issuance costs, an increase in investment, and a decrease in leverage. Our findings provide evidence that reducing equity issuance barriers benefits issuers even in highly developed markets.

Keywords: Seasoned Equity Offerings, PIPEs, Accelerated SEO, Issuance Costs, Shelf Registrations

JEL Classification: G32, G18

Suggested Citation

Gustafson, Matthew and Iliev, Peter, The Effects of Removing Barriers to Equity Issuance (July 2016). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2549857 or http://dx.doi.org/10.2139/ssrn.2549857

Matthew Gustafson (Contact Author)

Pennsylvania State University - Smeal College of Business ( email )

East Park Avenue
University Park, PA 16802
United States

Peter Iliev

Pennsylvania State University - Department of Finance ( email )

348 Business Building
University Park, PA 16802
United States

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