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When The Rules Change: The Uneven Effects of SEC's Accredited Investor Reform
When The Rules Change: The Uneven Effects of SEC's Accredited Investor Reform
Sole-Authored
Sole-Authored
Abstract:
This paper examines how changes in investor protection regulation impact local angel financing and entrepreneurial activity. I exploit the SEC’s 2020 expansion of the accredited investor definition as a quasi-natural experiment and find increases in angel investor participation, investment volume, and net job creation. These effects are concentrated in industries and states with greater pre-reform exposure, as proxied by ex ante investor sophistication. The reform also induces a reallocation in entrepreneurial financing by reducing reliance on small business loans and mortgage-based capital. Newly accredited investors select higher relative valuation investments and exhibit greater risk aversion. Overall, the findings indicate that the reform expanded capital formation, but its gains were disproportionate, reflecting persistent disparities in access to private capital.
Keywords: Angel Investors, Government Regulation, Entrepreneurship, Investor Protection.
JEL Classification: G24, G28, L26, K22, E24.
Presentations: 2026 Financial Management Association (Scheduled), Columbia Private Equity Research Conference, 2026 SWFA Conference, 2026 American Finance Association Annual Meeting PhD Session, 2025 Academy of Behavioral Finance & Economics Annual Meeting, 2nd Annual Boca Finance and Real Estate Conference, The University of Oklahoma.
with William Megginson & Hyeonjoon Park.
with William Megginson & Hyeonjoon Park.
Abstract:
This study examines the impact of COVID-19 on venture capital (VC) investment strategies, startup characteristics, and investment outcomes. Using a deal-level dataset from PitchBook (2017–2022), we document a significant increase in the physical distance between VCs and startups post-pandemic, with VCs investing 34.4% and 31.6% farther in 2021 and 2022 compared to 2017. In response to remote financing challenges, VCs increased syndication, reduced deal sizes and durations, and concentrated investments in familiar industries. Startups funded after COVID-19 exhibit reduced innovation, fewer employees, and are more likely to operate in industries where VCs have prior investment experience. Additionally, startups receiving post-pandemic funding show lower exit performance, particularly those located farther from their VCs, highlighting the challenges of monitoring remote investments. Our findings suggest that while COVID-19 enabled VCs to expand their geographic scope, it also introduced trade-offs in investment performance and company-level outcomes. This study contributes to understanding the evolving VC funding dynamics in the post-pandemic era.
Keywords: Venture Capital; Entrepreneurship; Distance; COVID-19; Startup Performance.
JEL Classification: G24, G23, G20.
Presentations: 2025 Financial Management Association Annual Meeting, 2025 Southern Finance Association Annual Meeting, 2025 Modern Risk Society International Conference, 2025 World Finance Conference, European Financial Management Association (EFMA, 2025), 4th Conference on International Sustainable and Climate Finance/International Financial Integration, Barcelona School of Economics Summer Forum (BSE 2025), Financial Engineering and Banking Society (FEBS 2025), University of Oklahoma (2025).
with William Megginson. (R&R, The Review of Corporate Finance Studies)
with William Megginson. (R&R, The Review of Corporate Finance Studies)
Abstract:
This study presents a financial economics analysis of the global Space Economy, with annual revenues of around $600 billion (0.6% of global GDP). Commercial products and services represent three-fourths of space economy revenues, while government orders account for one-fourth. I categorize the space economy along an entrepreneurial spectrum, ranging from: (1) a Pure Science and Exploration sector, wherein projects are sponsored exclusively by national space agencies and financed solely with government contracts; through (2) a Military sector, also exclusively sponsored and funded (often secretly) by national military and intelligence organizations; to (3) a Human Space Exploration sector, with mixed government and commercial oversight and funding, currently focused on Earth-orbiting space stations but anticipating lunar and Martian visits; and (4) a Commercial sector, funded and operated by private companies that launch and operate satellites, provide communications and Earth-monitoring services, and collect and sell data thus produced. Since the Space Shuttle ended in 2011, national space agencies, especially NASA, have increasingly relied on private companies to provide space services under fixed price contracts. There has also been a massive decline in launch costs, from $18,500/kg to $1,400/kg, driven mostly by SpaceX’s relentless pursuit of efficiency, scale, and rocket reusability. Far more than in most other capital-intensive industries, the space economy is dominated by private (unlisted) companies; relies far more than most industries on government contracts and venture capital for funding, rather than external debt and retained earnings; and faces very high bankruptcy costs due to extreme asset-specificity and rapid obsolescence.
Keywords: Space exploration, satellites, rockets, venture capital.
JEL classification: H5, L1, O3, O32, O38.
Presentations: Université Paris Dauphine, UIBE (Beijing), the University of Oklahoma, the University of South Carolina, West Virginia University, 2024 Financial Management Association meeting.
Work in Progress
Work in Progress
Continuation Funds: Crown Jewels or Ponzi Schemes?
with Jared Stanfield.
MSCI-Burgiss data grant through the Institute for Private Capital (IPC).
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