The JOBS Act and Information Uncertainty in IPO Firms

Abstract

This study examines whether the Jumpstart Our Business Startups Act (JOBS Act) increases information uncertainty in IPO firms. The JOBS Act creates a new category of issuer, the Emerging Growth Company (EGC), and eases disclosure requirements for IPO firms with EGC status. Measuring information uncertainty using IPO underpricing and post-IPO return volatility, we find that both underpricing and volatility are significantly greater for IPO firms with EGC status than comparable firms without EGC status. Additional findings indicate that variation in the application of specific provisions of the JOBS Act explains the differences in underpricing and volatility. Taken together, the findings indicate that the JOBS Act’s eased disclosure requirements increased information uncertainty in IPO firms.