Do the Burdens to Being Public Affect the Investment and Innovation of Newly Public Firms?

51 Pages Posted: 4 Oct 2017 Last revised: 22 Aug 2018

See all articles by Michael Dambra

Michael Dambra

SUNY at Buffalo - School of Management

Matthew Gustafson

Pennsylvania State University - Smeal College of Business

Date Written: August 21, 2018

Abstract

We examine how the regulatory burdens to being public affect the investment and innovation of newly public firms. To do so, we exploit the Jumpstart our Business Start-up (JOBS) Act, which eliminates certain disclosure, auditing, and governance requirements for a subset of newly public firms. Firms treated with these reduced burdens invest more and more efficiently after going public relative to untreated firms. These findings are concentrated in innovative investments, are accompanied by treated firms being less prone to cater to short-term earnings benchmarks, and are non-existent in dual class firms. We conclude that one reason the burdens to being public affect investment and innovation is because they divert resources away from long-run value increasing investments.

Keywords: JOBS Act, Investment, IPO, Disclosure, Sarbanes-Oxley

JEL Classification: G31, G38, M48, M41

Suggested Citation

Dambra, Michael and Gustafson, Matthew, Do the Burdens to Being Public Affect the Investment and Innovation of Newly Public Firms? (August 21, 2018). Available at SSRN: https://ssrn.com/abstract=3047271 or http://dx.doi.org/10.2139/ssrn.3047271

Michael Dambra (Contact Author)

SUNY at Buffalo - School of Management ( email )

354 Jacobs Management Center
Buffalo, NY 14260-1660
United States
716-645-3237 (Phone)

Matthew Gustafson

Pennsylvania State University - Smeal College of Business ( email )

East Park Avenue
University Park, PA 16802
United States

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