Does General Solicitation Improve Access to Capital for Small Businesses? Evidence from the JOBS Act
55 Pages Posted: 23 Jun 2020 Last revised: 8 Oct 2021
Date Written: October 7, 2021
We examine whether Title II of the JOBS Act increases small firms’ access to capital. Under Title II, firms can sell private placement securities to the public via general solicitation (GS) or privately (non-GS). We find that GS offerings tend to be of lower quality than non-GS offerings. After accounting for selection, GS offerings are less likely to succeed, raise less capital, and incur substantial brokerage costs for advertising and verifying that investors are accredited. 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, Raising Capital, Private Placements, SME Financing, Entrepreneurial Finance
JEL Classification: G24, G28, G32, G38, K22, L26
Suggested Citation: Suggested Citation