Raising Equity under Deregulation: Evidence from the JOBS Act
79 Pages Posted: 20 Nov 2019 Last revised: 21 Nov 2019
Date Written: November 18, 2019
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: Suggested Citation