Efficacy of the 1992 Small Business Incentive Act
AbstractPurpose – The purpose of this paper is to test the fundamental purpose of the 1992 Small Business Incentive Act (SBIA) to reduce the regulatory burden for small firms to raise public equity capital. Design/methodology/approach – Our research compares initial public offerings (IPOs) that filed with the newer SB-2 program to benchmark firms that filed using the traditional S-1 filing. The authors use three proxies to measure success, hypothesizing that, if the regulatory burden has indeed been reduced for small firms, all three variables should be smaller for SB-2 IPOs. Univariate and multivariate analyses were conducted. Findings – With regards to easing regulatory costs, it is found that the program has not been effective. On average, SB-2 IPOs experience larger-scaled offering expenses, and pay higher underwriter gross spreads compared to S-1 IPOs of similar size. SB-2 IPOs, however, take fewer days to complete the registration process, when controlling for other relevant factors. In the burden of time, the SBIA has been effective. Practical implications – The paper is of value to managers of firms desiring to conduct an IPO. These managers, if they meet the size requirements dictated by the SEC, can elect to use an SB-2 or an S-1 document. The paper shows that if cost is the primary concern, the S-1 program should be preferred. If time is the primary consideration, then the SB-2 program is preferred. Originality/value – To the authors' knowledge, they are the first to test the efficacy of the SBIA program.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Emerald Group Publishing in its journal Journal of Financial Economic Policy.
Volume (Year): 4 (2012)
Issue (Month): 3 (August)
Contact details of provider:
Web page: http://www.emeraldinsight.com
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bradley, Daniel J. & Jordan, Bradford D., 2002. "Partial Adjustment to Public Information and IPO Underpricing," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 37(04), pages 595-616, December.
- Hsuan-Chi Chen & Jay R. Ritter, 2000. "The Seven Percent Solution," Journal of Finance, American Finance Association, vol. 55(3), pages 1105-1131, 06.
- Ritter, Jay R., 1987. "The costs of going public," Journal of Financial Economics, Elsevier, vol. 19(2), pages 269-281, December.
- James S. Ang & James C. Brau, 2002. "Firm Transparency and the Costs of Going Public," Journal of Financial Research, Southern Finance Association & Southwestern Finance Association, vol. 25(1), pages 1-17.
- Daniel J. Bradley & John W. Cooney, Jr. & Steven D. Dolvin & Bradford D. Jordan, 2006.
"Penny Stock IPOs,"
Financial Management Association, vol. 35(1), Spring.
- Tim Loughran & Jay Ritter, 2004. "Why Has IPO Underpricing Changed Over Time?," Financial Management, Financial Management Association, vol. 33(3), Fall.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Harris).
If references are entirely missing, you can add them using this form.