EconPapers    
Economics at your fingertips  
 

The Jobs Act Did Not Raise IPO Underpricing

Even-Tov Omri, N. Patatoukas Panos and S. Yoon Young

Critical Finance Review, 2022, vol. 11, issue 3-4, 431-471

Abstract: While the intended goal of the 2012 Jumpstart Our Business Startups Act was to ease access to capital for emerging growth companies (EGCs), prior studies, notably Barth et al. (2017), find evidence of an increase in initial public offering (IPO) underpricing and a higher cost of equity capital for EGC issuers. Using a difference-in-differences research design, we find that changes in overall IPO market conditions explain the seeming increase in IPO underpricing. In fact, EGC issuers that take advantage of the accounting disclosure relief afforded by the Act raise capital at higher pre-IPO multiples. These reduced-accounting disclosure EGCs have more speculative valuation profiles and lower institutional ownership and are more likely to destroy long-term shareholder value in the IPO aftermarket. Overall, our paper offers an alternative perspective on the effect of the JOBS Act on IPO pricing.

Keywords: JOBS Act; Emerging growth companies; IPO pricing (search for similar items in EconPapers)
JEL-codes: G20 G24 G38 K22 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://dx.doi.org/10.1561/104.00000117 (application/xml)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:now:jnlcfr:104.00000117

Access Statistics for this article

More articles in Critical Finance Review from now publishers
Bibliographic data for series maintained by Alet Heezemans ().

 
Page updated 2022-08-11
Handle: RePEc:now:jnlcfr:104.00000117