Do the Burdens to Being Public Affect the Investment and Innovation of Newly Public Firms?

Michael Dambra () and Matthew Gustafson ()
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Michael Dambra: University at Buffalo, State University of New York, Buffalo, New York 14260;
Matthew Gustafson: Pennsylvania State University, University Park, Pennsylvania 16802

Management Science, 2021, vol. 67, issue 1, 594-616

Abstract: We examine how regulatory burdens affect the investment and innovation of newly public firms. To do so, we exploit the Jumpstart Our Business Startups (JOBS) Act, which eliminates certain disclosure, auditing, and governance requirements for a subset of newly public firms. Firms treated with these reduced burdens invest more and more efficiently after going public relative to untreated firms. These findings are concentrated in innovative investments and are nonexistent in dual-class firms. Overall, our findings suggest that the burdens to being public exacerbate agency frictions, which lead managers to take on fewer risky projects.

Keywords: mandatory disclosure; investment; JOBS Act; IPO; research and development; innovation (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:67:y:2021:i:1:p:594-616

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