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

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

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 decisio...

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Bibliographic Details
Published in:Journal of business finance & accounting Vol. 47; no. 1-2; pp. 188 - 217
Main Authors: Engelen, Peter‐Jan, Meoli, Michele, Signori, Andrea, Vismara, Silvio
Format: Journal Article
Language:English
Published: Oxford Blackwell Publishing Ltd 01-01-2020
Subjects:
Companies
Europe
G30
G38
Going public
IPOs
regulation
Securities regulations
SOX
underpricing
valuation
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Summary: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.
ISSN:0306-686X
1468-5957
DOI:10.1111/jbfa.12417