The effects of removing barriers to equity issuance

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Abstract

We study the consequences of a US deregulation allowing small firms to accelerate their public equity issuance. Post-deregulation, affected firms double their reliance on public equity and transition away from private investments in public equity compared to similar untreated firms. The net effect is a 5.7 percentage point or 49% increase in the annual probability of raising equity. This is accompanied by a reduction in equity issuance costs, an increase in investment, and a decrease in leverage. Our findings provide evidence that reducing equity issuance barriers benefits issuers even in highly developed markets.

Original languageEnglish (US)
Pages (from-to)580-598
Number of pages19
JournalJournal of Financial Economics
Volume124
Issue number3
DOIs
StatePublished - Jun 2017

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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