How does the JOBS act affect the rule 144A market?

Abstract

AbstractIn this article, we examine the effects of Title II of the Jumpstart Our Business Startups (JOBS) Act on the cost and issue size of Rule 144 debts for a sample from 2002 to 2019. We find that after the enactment of the JOBS Act, the average cost (issue size) of the Rule 144 A offers decreases (increases) significantly. The findings are robust after controlling for issue‐, issuer‐, and country‐specific characteristics as well as market conditions. Evidence based on the propensity‐score‐matched sample, including public debt issues, subsample analyses, difference‐in‐differences tests, and alternative event windows, further shows that domestic firms benefit more from the JOBS Act as they have a greater reduction in the cost of debt and increase in the issue size. Overall, our results are consistent with the increased investor base hypothesis and suggest that Title II of the JOBS Act satisfies Congress's goal of making it more cost efficient for Rule 144 A issuers.