Does General Solicitation Improve Access to Capital for Small Businesses? Evidence from the JOBS Act
52 Pages Posted: 23 Jun 2020 Last revised: 1 Feb 2021
Date Written: January 31, 2021
We examine whether Title II of the JOBS Act increases small firms’ access to capital. Title II allows firms to sell securities via general solicitations to accredited investors. We find that general solicitation offerings tend to be of lower quality than other offerings. After accounting for selection, such offerings are less likely to succeed, raise less capital than other offerings, and incur substantial brokerage costs to verify that investors are accredited under the Act. Our results imply the need to craft policies that induce better ways of signaling firm quality or more transparent approaches to reducing information asymmetry.
Keywords: JOBS Act, Regulation, Equity Crowdfunding, Raising Capital, Private Placements, SME Financing, Entrepreneurial Finance
JEL Classification: G18, G24, G28, G32, G38, K22, L26
Suggested Citation: Suggested Citation