The effects of stricter regulation on the going public decision of small and knowledge-intensive firms

Peter Jan Engelen; Michele Meoli; Andrea Signori; Silvio Vismara

doi:10.1111/jbfa.12417

The effects of stricter regulation on the going public decision of small and knowledge-intensive firms

Peter Jan Engelen, Michele Meoli, Andrea Signori, Silvio Vismara^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › Academic › peer-review

Abstract

This paper studies the impact of increased securities regulation on the IPOs of small and high-tech, knowledge-intensive firms. We take advantage of the adoption of European SOX-like provisions, staggered at different dates across European countries, to test its influence on the going public decision. Starting from the population of European private firms during 1995–2012, we find that the likelihood of going public has decreased among small and high-tech, knowledge-intensive firms. Consistently, we document a 6% and 8.5% decrease in the industry-adjusted Tobin's Q of small and knowledge-intensive firms that go public after the regulatory change.

Original language	English
Pages (from-to)	188-217
Number of pages	30
Journal	Journal of Business Finance and Accounting
Volume	47
Issue number	1-2
DOIs	https://doi.org/10.1111/jbfa.12417
Publication status	Published - 1 Jan 2020

Funding

We would like to thank Yan Alperovych, Wolfgang Bessler, Douglas Cumming, Jongsub Lee, Michelle Lowry, Volkan Muslu, Jay Ritter, Jeroen van Raak, Bart Zhou Yueshen, Wei Wang, seminar participants at Aarhus University, and participants in the 2016 FMA meetings and 2017 ENTFIN conference for helpful comments. Research data not shared.

Keywords

Europe
G30
G38
IPOs
regulation
SOX
underpricing
valuation

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10.1111/jbfa.12417

jbfa.12417Final published version, 313 KBLicence: Taverne

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AB - This paper studies the impact of increased securities regulation on the IPOs of small and high-tech, knowledge-intensive firms. We take advantage of the adoption of European SOX-like provisions, staggered at different dates across European countries, to test its influence on the going public decision. Starting from the population of European private firms during 1995–2012, we find that the likelihood of going public has decreased among small and high-tech, knowledge-intensive firms. Consistently, we document a 6% and 8.5% decrease in the industry-adjusted Tobin's Q of small and knowledge-intensive firms that go public after the regulatory change.

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The effects of stricter regulation on the going public decision of small and knowledge-intensive firms

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