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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, Job Market Paper.
Sole-Authored, Job Market Paper.
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 an increase in angel investor participation, investment volume, employment, and early-stage firm formation. These effects are concentrated in sectors and regions with greater pre-reform exposure, as proxied by ex ante investor sophistication. The regulatory shift also produces a reallocation effect in entrepreneurial financing by reducing reliance on small business loans and mortgage-based capital. At the firm level, startups backed by newly accredited investors experience shorter durations between rounds and higher survival rates. New entrants both select higher relative valuation investments and exhibit greater risk aversion, indicating a more selective investment approach. Overall, the findings reveal a trade-off between early-stage financing and investor protection and underscore the regulatory challenges of equitable access to private capital markets.
Keywords: Angel Investors, Government Regulation, Entrepreneurship, Investor Protection.
JEL Classification: G24, G28, L26, K22, E24.
Presentations: 2026 American Finance Association PhD Session (Scheduled), 2025 Sydney Banking and Financial Stability Conference (Scheduled), 2025 Academy of Behavioral Finance & Economics Annual Meeting (Scheduled), The University of Oklahoma (Scheduled).
with Paul Lavery & William Megginson. (R&R, Journal of Corporate Finance)
with Paul Lavery & William Megginson. (R&R, Journal of Corporate Finance)
Abstract:
We present the first large-sample analysis of growth equity (GE) investment using a sample of 1,512 UK private companies over 2000-2021 and compare the post-investment performance of investee firms to matched companies that did not receive GE investment. The United Kingdom is an ideal empirical setting for this study because it is the second largest private capital market and financial information is available for all UK limited companies. GE target companies are younger, smaller, more intangible-asset intensive and more rapidly growing than the general pool of UK private companies. Target firms then dramatically outperform a matched sample of non-GE backed private companies after investment with respect to sales and asset growth, employment, and earnings growth. Much of this extra expansion is financed by significantly faster growth in leverage than for non-GE backed firms. This higher leverage causes GE backed companies to encounter financial distress more frequently than matching firms, but treated firms can navigate distress—including bankruptcy—relatively more successfully than matching distressed firms. We also compare GE-backed companies to British private companies receiving venture capital or private equity (buyout) investment.
Keywords: Private equity, Growth equity, Buyouts, Firm performance, Firm survival.
JEL Classification: F140, G01, G23, G28, G32, G34.
Presentations: 41st French Finance Association (AFFI, 2025), Corporate Finance Days 2024, 2024 Private Equity Research Consortium (PERC) Spring Symposium, 2024 EFiC Conference in Banking and Finance, 2024 Financial Management Association European Conference, AfriMed Summer Conference (2024), 8th Entrepreneurial Finance (ENTFIN Munich), ENTFIN Doctoral Colloquium, Financial Engineering and Banking Society (FEBS 2024), 2024 Academy of International Business Annual Meeting (Seoul), Université Paris Dauphine (2024), University of Exeter (2024), University of Oklahoma (2023).
Featured In: Financial Times.
with William Megginson & Hyeonjoon Park. (Under Review)
with William Megginson & Hyeonjoon Park. (Under Review)
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 (Scheduled, 2025), 2025 Southern Finance Association Annual Meeting (Scheduled, 2025), 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.
Charting New Frontiers: A Contemporary Perspective on State Ownership
Charting New Frontiers: A Contemporary Perspective on State Ownership
with William Megginson, Peter Mueller, and Leonid Pugachev. (R&R, Corporate Governance: An International Review)
with William Megginson, Peter Mueller, and Leonid Pugachev. (R&R, Corporate Governance: An International Review)
Abstract:
This paper reviews the evolving role of government in business through the lens of state-owned enterprises (SOEs) and privatizations since the late 20th century. We particularly focus on the impact of economic shifts, such as those caused by the 2008 Global Financial Crisis and the COVID-19 pandemic, on privatization trends and on the burgeoning prominence of sovereign wealth funds (SWFs) in global capital markets.
Keywords: State-owned enterprises, sovereign wealth funds, de-globalization, privatization.
JEL classification: E02, K23, L13, G32, G15, G38, O13, P27, P28.
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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