Aftermarket performance of emerging growth companies: The long-term effects of the JOBS act and the role of institutional investors

We study the long-run aftermarket performance of Emerging Growth Companies (EGCs), a new category of IPO issuers created by the Jumpstart Our Business Startups Act (JOBS Act). We document that, in the long run, EGCs outperform by about 25 percentage points, compared to those firms that would have qualified as EGCs had they gone public after the enactment of the JOBS Act. We further find that institutional investors play an important role in supporting the long-run performance of EGCs—not only do EGCs have greater institutional ownership, but the positive effect of institutional ownership on IPO firms' long-run performance is also more pronounced. The paper represents a first attempt to study the long-run aftermarket performance of EGCs and its determinants. Our findings contribute to the burgeoning literature on the effectiveness of the JOBS Act and evidence of the supporting role of institutional investors on IPO aftermarket performance.