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

See all articles by Anantha Divakaruni

Anantha Divakaruni

University of Bergen

Howard Jones

University of Oxford, Saïd Business School

Date Written: May 16, 2021

Abstract

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

Divakaruni, Anantha and Jones, Howard, How does Mandatory Disclosure affect Firm Growth? Evidence from Firms that Lose their JOBS Exemptions (May 16, 2021). Available at SSRN: https://ssrn.com/abstract=3845468 or http://dx.doi.org/10.2139/ssrn.3845468

Anantha Divakaruni (Contact Author)

University of Bergen ( email )

Fosswinckelsgt. 6
N-5007 Bergen, 5007
Norway

Howard Jones

University of Oxford, Saïd Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

HOME PAGE: http://www.sbs.ox.ac.uk/about-us/people/howard-jones

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