Raising Equity under Deregulation: Evidence from the JOBS Act

79 Pages Posted: 20 Nov 2019 Last revised: 21 Nov 2019

See all articles by Anantha Divakaruni

Anantha Divakaruni

University of Bergen

Howard Jones

University of Oxford, Saïd Business School

Date Written: November 18, 2019

Abstract

The Jumpstart Our Business Startups (JOBS) Act seeks to improve access to capital by deregulating both public and private equity markets in the US. We find that the Act incentivizes cash-starved firms to go public rather than raise capital privately. Proceeds raised are used to repay debt and pay executives, not to increase investments. Moreover, firms going public under the JOBS Act pay more to raise equity and often rely on further public issues to avert financial distress. These results suggest that the Act is mainly encouraging lower-quality firms to go public rather than stay private.

Keywords: Policy, Deregulation, JOBS Act, Initial public offerings, Private equity, Equity financing

JEL Classification: G14, G24, G28, G32

Suggested Citation

Divakaruni, Anantha and Jones, Howard, Raising Equity under Deregulation: Evidence from the JOBS Act (November 18, 2019). Available at SSRN: https://ssrn.com/abstract=3489404 or http://dx.doi.org/10.2139/ssrn.3489404

Anantha Divakaruni (Contact Author)

University of Bergen ( email )

Fosswinckelsgt. 6
N-5007 Bergen, 5007
Norway

Howard Jones

University of Oxford, Saïd Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

HOME PAGE: http://www.sbs.ox.ac.uk/research/people/Pages/HowardJones.aspx

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