The JOBS Act, underwriting costs, and voluntary disclosure


The 2012 Jumpstart Our Business Startups Act (JOBS Act) was enacted to enable emerging growth companies (EGCs) to raise capital without facing vigorous regulations. We investigate whether underwriting fees and indirect costs of initial public offerings (IPOs) change after the passage of the JOBS Act. Unlike recent studies that investigate the impact of post-IPO voluntary disclosure, we investigate the role of the pre-IPO voluntary disclosure of use-of-proceeds for EGCs. Using a sample of 492 IPOs from April 5, 2009 to April 5, 2015, we find that after the adoption of the JOBS Act, IPOs’ indirect costs increase while the underwriting commissions decrease and that the effects of the JOBS Act on IPOs’ indirect costs and underwriting commissions are weaker for firms that have a high level of voluntary disclosure of use-of-proceeds. Results suggest that the optimal level of voluntary disclosures within the mandatory framework benefit EGCs and their investors and have policy, practice, and educational implications.

Publication Title

Journal of Corporate Accounting Camp; Finance