Informing Entrepreneurs: Public Corporate Disclosure and New Business Formation

58 Pages Posted: 7 Jul 2020 Last revised: 8 Apr 2021

See all articles by John Manuel Barrios

John Manuel Barrios

Washington University in St. Louis - Olin Business School; National Bureau of Economic Research

Jung Ho Choi

Stanford University Graduate School of Business

Yael V. Hochberg

National Bureau of Economic Research (NBER); Rice University - Jesse H. Jones Graduate School of Business

Jinhwan Kim

Stanford Graduate School of Business

Miao Liu

Boston College - Carroll School of Management

Date Written: March 18, 2021

Abstract

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

Barrios, John Manuel and Choi, Jung Ho and Hochberg, Yael V. and Kim, Jinhwan and Liu, Miao, Informing Entrepreneurs: Public Corporate Disclosure and New Business Formation (March 18, 2021). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2020-92, Available at SSRN: https://ssrn.com/abstract=3640736 or http://dx.doi.org/10.2139/ssrn.3640736

John Manuel Barrios (Contact Author)

Washington University in St. Louis - Olin Business School ( email )

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National Bureau of Economic Research ( email )

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Jung Ho Choi

Stanford University Graduate School of Business ( email )

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(650)721-8434 (Phone)

Yael V. Hochberg

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
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Jinhwan Kim

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Miao Liu

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

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