The impact of the JOBS act on the costs of going public: evidence from long-term audit costs

Document Type

Article

Publication Date

1-1-2024

Abstract

The Jumpstart Our Business Startups (JOBS) Act (2012) allows reduced compliance costs for IPOs with less than $1 billion in revenues. While prior research has focused on the Act’s ability to reduce short-term IPO compliance costs, we investigate how the Act affected key observable compliance costs–audit fees–over the five years the issuing firm is eligible for this reduced level of disclosure/compliance. In contrast to prior findings of increased short-term audit costs, we find that long-term audit costs decreased by 16.6 percent, or $172,000 for IPO firms following JOBS, relative to the change fees for in control firms unaffected by the regulation. After investigating other consequences of the Act, we find greater information uncertainty for affected firms following JOBS. However, we find lower accrual-based earnings management as responses to these information frictions. We find the reductions in earnings management is driven by firms with the greatest information uncertainty with investors, suggesting that affected firms take additional steps to mitigate the information risks in light of their inherently riskier IPOs. Overall, we present a fuller picture of the costs/benefits and risk mitigation in post-JOBS IPOs.

Identifier

85201826565 (Scopus)

Publication Title

Accounting and Business Research

External Full Text Location

https://doi.org/10.1080/00014788.2024.2382298

e-ISSN

21594260

ISSN

00014788

This document is currently not available here.

Share

COinS