Disclosure, Firm Growth, and the JOBS Act
93 Pages Posted: 14 May 2021 Last revised: 17 May 2021
Date Written: May 16, 2021
We study the effects of regulatory disclosure on investment and growth by comparing newly public firms before and after they lose disclosure exemptions under the Jumpstart Our Business Startups (JOBS) Act. Exempt firms invest more in physical assets, innovation, and acquisitions than firms that lose exemptions, but experience steeper declines in growth opportunities over time. Firms that lose exemptions exhibit better allocation of equity to investments and utilization of existing assets, which improves their Tobin’s q. Relaxing disclosure requirements seems to induce inefficiencies in managerial investment decisions and hence inhibits firms from exploiting or replenishing their growth opportunities.
Keywords: Information Disclosure, Initial Public Offerings, Regulation, Firm Financing, JOBS Act
JEL Classification: G14, G24, G28, G32
Suggested Citation: Suggested Citation