Does Advertising Improve Access to Capital for Small Businesses? Evidence from the JOBS Act

50 Pages Posted: 23 Jun 2020

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: May 29, 2020

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 firms that offer securities via general solicitation tend to be of lower quality. After accounting for selection, we find that general solicitation offerings are less likely to succeed, and they raise lower amounts of capital than other offerings. Moreover, general solicitation offerings 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 Advertising Improve Access to Capital for Small Businesses? Evidence from the JOBS Act (May 29, 2020). 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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