The JOBS Act disclosure exemptions: Some early evidence

Abstract

This paper examines early evidence of IPO registrants' disclosure exemption choices in response to the optional disclosure relief provided by the recently enacted Jumpstart Our Business Startups Act (JOBS Act) of 2012. The JOBS Act provides firms going public classified as “emerging growth companies” (EGCs) with certain accounting and financial reporting and disclosure exemptions not available to other issuers. The study's results for EGC firms filing prospectuses through August, 2013, indicate that for the earliest companies affected by the JOBS Act, greater board independence and audit committee accounting expertise are associated with greater likelihood of foregoing financial reporting exemptions. Moreover, the study finds that scaled executive compensation disclosure exemptions had widespread acceptance while the private company accounting standards and reduced audited financial statements exemption provisions were initially less utilized. Finally, the study finds that even though the JOBS Act raised the threshold for disclosure relief up to $1 billion in revenues, those firms that were already classified as smaller reporting companies which already have less extensive disclosure demands under SRC Rule #33–8876, were those most likely to initially take these exemptions. The paper discusses the practical implications of the study's findings for accounting standard-setters, watchdogs, and policy makers.