The Effects of Stricter Regulation on the Going Public Decision of Small and Knowledge‐Intensive Firms
30 Pages Posted: 27 May 2020
Date Written: January/February 2020
This paper studies the impact of increased securities regulation on the IPOs of small and high‐tech, knowledge‐intensive firms. We take advantage of the adoption of European SOX‐like provisions, staggered at different dates across European countries, to test its influence on the going public decision. Starting from the population of European private firms during 1995–2012, we find that the likelihood of going public has decreased among small and high‐tech, knowledge‐intensive firms. Consistently, we document a 6% and 8.5% decrease in the industry‐adjusted Tobin's Q of small and knowledge‐intensive firms that go public after the regulatory change.
Keywords: Europe, IPOs, regulation, SOX, underpricing, valuation
JEL Classification: G30, G38
Suggested Citation: Suggested Citation