How Less Disclosure Affects Risk Perceptions

The Lemons Problem: How Less Disclosure Affects Risk Perceptions by Knowledge@Wharton

When the JOBS (Jumpstart Our Business Startups) Act became law in 2012, one provision allowed firms to reduce the amount of information that they provide to investors before an IPO. This was meant to make it easier for smaller firms to get outside investors. Research co-authored by Wharton accounting professor Daniel Taylor finds that those shortcuts have had some unintended — and costly — consequences. The paper, “The JOBS Act and Information Uncertainty in IPO Firms,” was authored by Taylor, Mary E. Barth of Stanford University’s Graduate School of Business and Wayne R. Landsman of the University of North Carolina’s Kenan-Flagler Business School.

In this interview...