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The effects of removing barriers to equity issuance

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  • Gustafson, Matthew T.
  • Iliev, Peter

Abstract

We study the consequences of a US deregulation allowing small firms to accelerate their public equity issuance. Post-deregulation, affected firms double their reliance on public equity and transition away from private investments in public equity compared to similar untreated firms. The net effect is a 5.7 percentage point or 49% increase in the annual probability of raising equity. This is accompanied by a reduction in equity issuance costs, an increase in investment, and a decrease in leverage. Our findings provide evidence that reducing equity issuance barriers benefits issuers even in highly developed markets.

Suggested Citation

  • Gustafson, Matthew T. & Iliev, Peter, 2017. "The effects of removing barriers to equity issuance," Journal of Financial Economics, Elsevier, vol. 124(3), pages 580-598.
    • Handle: RePEc:eee:jfinec:v:124:y:2017:i:3:p:580-598
    DOI: 10.1016/j.jfineco.2017.03.008
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    More about this item

    Keywords

    Seasoned equity offerings; PIPEs; Follow-on offering; SEO Issuance costs; Shelf registrations;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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