Informing Entrepreneurs: Public Corporate Disclosure and New Business Formation

49 Pages Posted: 7 Jul 2020

See all articles by John Manuel Barrios

John Manuel Barrios

Washington University in St. Louis - Olin Business School

Jung Ho Choi

Stanford University Graduate School of Business

Yael V. Hochberg

National Bureau of Economic Research (NBER); Rice University - Jesse H. Jones Graduate School of Business

Jinhwan Kim

Stanford Graduate School of Business

Miao Liu

Boston College - Carroll School of Management

Date Written: June 22, 2020

Abstract

We examine the relationship between public firm disclosure and aggregate new business formation. Consistent with the notion that public company disclosures provide information spillovers that reduce the extent of uncertainty about new investment opportunities, we find that increased public firm presence is positively associated with new business formation in an industry. Furthermore, using plausibly exogenous information shocks generated by new IPOs in a geographic area, we find that post-IPO, new business registration in the public company's geographic area rise by 4 to 10%, consistent with soft information channels serving to reinforce hard information in public disclosures. New IPOs are associated with significant increases in Edgar downloading activity in the IPOs’ geographic area, consistent with the notion that public firm disclosures are providing important investment opportunity information that facilitates new business formation.

Keywords: Entrepreneurship, New Business Formation, Uncertainty, Financial Disclosures, Real Effects, Externalities, IPOs

JEL Classification: D80, D81, D83, L26, M41

Suggested Citation

Barrios, John Manuel and Choi, Jung Ho and Hochberg, Yael V. and Kim, Jinhwan and Liu, Miao, Informing Entrepreneurs: Public Corporate Disclosure and New Business Formation (June 22, 2020). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2020-92, Available at SSRN: https://ssrn.com/abstract=3640736 or http://dx.doi.org/10.2139/ssrn.3640736

John Manuel Barrios (Contact Author)

Washington University in St. Louis - Olin Business School ( email )

One Brookings Drive
Campus Box 1208
Saint Louis, MO MO 63130-4899
United States

Jung Ho Choi

Stanford University Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
(650)721-8434 (Phone)

Yael V. Hochberg

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States

Jinhwan Kim

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Miao Liu

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

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