How does Mandatory Disclosure affect Firm Growth? Evidence from Firms that Lose their JOBS Exemptions
74 Pages Posted: 14 May 2021 Last revised: 13 Apr 2022
Date Written: May 16, 2021
U.S. firms which go public under the JOBS Act benefit from disclosure exemptions, but on average these last for only two years. We study the impact on the investments and growth opportunities of these firms when they move to mandatory disclosure. After losing their exemptions, firms raise less equity relative to debt and invest less in physical assets, innovation, and acquisitions. At the same time, they exhibit better allocation of equity to investments, better utilization of existing assets, and improvements in Tobin’s q. These findings suggest that disclosure-exempt firms prioritise investment, but those subject to stricter disclosure requirements make more efficient investment decisions.
Keywords: Information Disclosure, Initial Public Offerings, Regulation, Firm Financing, JOBS Act
JEL Classification: G14, G24, G28, G32
Suggested Citation: Suggested Citation