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

See all articles by Anup Agrawal

Anup Agrawal

University of Alabama - Culverhouse College of Commerce & Business Administration

Yuree Lim

University of Wisconsin - La Crosse - College of Business Administration

Date Written: January 31, 2021

Abstract

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

Agrawal, Anup and Lim, Yuree, Does General Solicitation Improve Access to Capital for Small Businesses? Evidence from the JOBS Act (January 31, 2021). Available at SSRN: https://ssrn.com/abstract=3602183 or http://dx.doi.org/10.2139/ssrn.3602183

Anup Agrawal (Contact Author)

University of Alabama - Culverhouse College of Commerce & Business Administration ( email )

Culverhouse College of Business
EFLS, Box 870224
Tuscaloosa, AL 35487-0224
United States
205-348-8970 (Phone)
205-348-0590 (Fax)

HOME PAGE: http://aagrawal.people.ua.edu/

Yuree Lim

University of Wisconsin - La Crosse - College of Business Administration ( email )

1725 State St
La Crosse, WI 54601
United States

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