IDEAS home Printed from
   My bibliography  Save this article

Efficacy of the 1992 Small Business Incentive Act


  • James C. Brau
  • J. Troy Carpenter


Purpose - 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.

Suggested Citation

  • James C. Brau & J. Troy Carpenter, 2012. "Efficacy of the 1992 Small Business Incentive Act," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 4(3), pages 204-217, July.
  • Handle: RePEc:eme:jfeppp:v:4:y:2012:i:3:p:204-217

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Hsuan-Chi Chen & Jay R. Ritter, 2000. "The Seven Percent Solution," Journal of Finance, American Finance Association, vol. 55(3), pages 1105-1131, June.
    2. 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.
    3. Daniel J. Bradley & John W. Cooney, Jr. & Steven D. Dolvin & Bradford D. Jordan, 2006. "Penny Stock IPOs," Financial Management, Financial Management Association, vol. 35(1), Spring.
      • Daniel J. Bradley & John W. Cooney Jr. & Steven D. Dolvin & Bradford D. Jordan, 2006. "Penny Stock IPOs," Financial Management, Financial Management Association International, vol. 35(1), pages 5-29, March.
    4. James C. Brau & Gardner Gee, 2010. "Micro-IPOs: An Analysis of the Small Corporate Offering Registration (SCOR) Procedure with National Data," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 14(3), pages 69-89, Fall.
    5. Tim Loughran & Jay Ritter, 2004. "Why Has IPO Underpricing Changed Over Time?," Financial Management, Financial Management Association, vol. 33(3), Fall.
    6. Ritter, Jay R., 1987. "The costs of going public," Journal of Financial Economics, Elsevier, vol. 19(2), pages 269-281, December.
    7. 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.
    Full references (including those not matched with items on IDEAS)


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:jfeppp:v:4:y:2012:i:3:p:204-217. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.