The Jobs Act and IPO Volume: Evidence that Disclosure Costs Affect the IPO Decision

Abstract

In April 2012, the JOBS Act was passed to help revitalize the IPO market, especially for small firms. During the year ending March 2014, IPO volume and proportion of small firm issuers was the largest since 2000. Controlling for market conditions, we estimate that the JOBS Act has led to 21 additional IPOs annually, a 25% increase over pre-JOBS levels. Firms with high proprietary disclosure costs, such as biotechnology and pharmaceutical firms, increase IPO activity most. These firms are also more likely to take advantage of the Act’s de-risking provisions, allowing firms to file the IPO confidentially while testing-the-waters.