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

See all articles by Anup Agrawal

Anup Agrawal

University of Alabama - Culverhouse College of Commerce & Business Administration

Yuree Lim

Texas Woman’s University

Date Written: October 7, 2021

Abstract

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

Agrawal, Anup and Lim, Yuree, Does General Solicitation Improve Access to Capital for Small Businesses? Evidence from the JOBS Act (October 7, 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

Texas Woman’s University ( email )

TX
United States

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