Do the burdens to being public affect the investment and innovation of newly public firms?

Michael Dambra, Matthew Gustafson

Research output: Contribution to journalArticlepeer-review

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.

Original languageEnglish (US)
Pages (from-to)594-616
Number of pages23
JournalManagement Science
Volume67
Issue number1
DOIs
StatePublished - Jan 2021

All Science Journal Classification (ASJC) codes

  • Strategy and Management
  • Management Science and Operations Research

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