Informing Entrepreneurs: Public Corporate Disclosure and New Business Formation
58 Pages Posted: 7 Jul 2020 Last revised: 8 Apr 2021
Date Written: March 18, 2021
We examine the relationship between public firm disclosure and aggregate new business formation. Consistent with the notion that public company disclosures provide information spillovers that reduce the extent of uncertainty about new investment opportunities, we find that increased public firm presence is positively associated with new business formation in an industry. Furthermore, using plausibly exogenous information shocks generated by new IPOs in a geographic area, we find that post-IPO, new business registrations in the public company's geographic area rise by 4 to 10%, in line with soft information channels serving to reinforce hard information in public disclosures. Consistent with the notion that public firm disclosures provide information that facilitates new business formation, we find that new business registrations are positively related to Edgar downloads. Moreover, these downloads magnify the relationship between IPOs and new business formation in the county.
Keywords: Entrepreneurship, New Business Formation, Uncertainty, Financial Disclosures, Real Effects, Externalities, IPOs
JEL Classification: D80, D81, D83, L26, M41
Suggested Citation: Suggested Citation