Factors Associated with Bank Deregistration Following the 2012 JOBS Act
Richard Frankel
Olin Business School
Washington University in St. Louis
Campus Box 1133
One Brookings Drive
St. Louis, MO 63130-4899
[email protected]
Joshua Lee
Olin Business School
Washington University in St. Louis
Campus Box 1133
One Brookings Drive
St. Louis, MO 63130-4899
[email protected]
Xiumin Martin
Olin Business School
Washington University in St. Louis
Campus Box 1133
One Brookings Drive
St. Louis, MO 63130-4899
[email protected]
First draft: September 2012
Revised: February 2013
We thank Fatima Afzaal, Dennis Chapman (Senior Staff Accountant at FDIC), and Travis Harris
at SNL Financial for data assistance. We also thank workshop participants at The University of
Southern California and Washington University in St. Louis for their helpful comments.
Factors Associated with Bank Deregistration
Following the 2012 JOBS Act
Abstract
The 2012 JOBS Act increases the deregistration threshold only for banks with between 300 and
1200 shareholders of record. Our purpose is to understand whether this change can alter the
relative importance of economic forces that determine the costs and benefits of deregistration.
More specifically, we investigate whether the banks’ deregistration decision reflects an effort by
slow growing banks to reduce excess compliance costs and/or whether the decision is associated
with an attempt by corporate insiders to gain private benefits. The Act permits a set of banks to
deregister with minimal transition costs and can thereby encourage deregistrations in the pursuit
of limited private benefits. We find, unlike prior deregistrations, banks that deregister after the
JOBS Act do not display a significant reduction in shareholders immediately prior to
deregistration, confirming the exogenous effect of the JOBS Act on bank deregistration decision.
Moreover, banks deregistering after the Act have significantly lower institutional ownership,
more insider trading and insider loans, and do not display significantly lower asset growth. In
contrast to positive returns during pre-JOBS Act deregistration announcements, announcement
returns for post-JOBS Act deregistrations are insignificant. Post-deregistration analyses provide
corroborating evidence that pre-Act (but not post-Act) deregistering banks improved accounting
performance after deregistration. By reducing the costs of deregistration, our results suggest the
Act allowed banks to capture private benefits while increasing the attractiveness of deregistration
for higher growth banks. Therefore, regulatory oversight does not fully substitute for the
expanded disclosures required by the SEC.
JEL: G14, G21, G24, G28
Key Words: Deregistration, private benefits, JOBS Act
1
Factors Associated with Bank Deregistration following the 2012 JOBS Act
“The decision to pursue deregistration was made after careful consideration of the costs and
benefits to the Company of SEC registration. Our review led us to conclude that SEC
registration comes at a considerable cost to the Company with little appreciable benefit to our
shareholders.”
Scott E. Fritz, President & CEO First Community Financial Corporation, 28 September 2012
“Shareholders should always be concerned when companies they invest in are allowed to
operate behind a veil.”
Amy Borrus, deputy director of the Council of Institutional Investors
1. Introduction
The 2012 Jumpstart Our Business Startups (JOBS) Act (hereafter the Act) increased the
threshold for deregistration under the Securities Exchange Act to 1200 shareholders from the
previous threshold of 300 shareholders. This deregistration threshold change only applies to
banks and bank holding companies rather than to the entire population of U.S. registrants with
the Securities and Exchange Commission (SEC). In the months following President Obama’s
signing the Act into law in April 2012, 90 banks deregistered, greater than the total number of
banks that have deregistered in the past 5 five years (see Figure 1).1
[Insert Figure 1 here]
Prior research (Leuz et al., 2008) suggests deregistration leads to insignificant changes in
investor monitoring for banks because banks that throw off Securities and Exchange
Commission (SEC) oversight remain subject to the reporting requirements and oversight of state
and federal bank regulators. However, bank regulators emphasize bank-failure risk while the
SEC is tasked with investor protection (ElBoghdady, 2013). For example, some disclosures
required by the SEC that can facilitate monitoring (e.g., proxy statements) have no counterparts
1
This number includes deregistration through October 11, 2012 obtained from SNL Financial.
2
in the realm of bank regulation. Moreover, the flood of bank deregistrations following the JOBS
Act implies it reduced the costs and scrutiny that accompanies actions necessary to deregister
(hereafter transition costs).2 While the Act can free banks from costly registration requirements
and increase funds available for lending (Congressional Record, 2011), we argue that the
reduced transition costs can amplify the private-benefits motive for deregistration. As an
experimental setting, the JOBS Act also offers the advantage of being less prone to producing a
mechanical relation between growth and deregistration. It thereby gives a more representative
indication of the motives for deregistration induced by deregulation.
Investigating the
determinants of bank deregistration under the JOBS Act also sheds light on whether bank
regulation (or regulation in general) substitutes for shareholder and SEC monitoring.
We study factors associated with banks’ decisions to deregister and banks’ stock price
reactions to the passage of the Act and the announcement of deregistration. We find that, in
contrast to pre-JOBS Act deregistrations, JOBS Act deregistrations are not associated with asset
growth and are negatively associated with the largest holdings of a single institution and the
number of consistent block holders. They also differ from previous deregistrations in that they
are positively associated with prior-year insider trading and lending to executive officers and
principal shareholders. Moreover, we find no significant stock price reaction to the passage of
the Act or to the deregistration announcement. These relations suggest post-JOBS Act
deregistrations did not significantly benefit shareholders. Last, we find that shareholders fared
2 One example of scrutiny accompanying actions to reduce the number of shareholders of record is the filing of
Form 13E-3. Leuz et al. (2008) show that deregistration announcement returns are higher for firms that filed 13E-3
suggesting that 13E-3 filing better protects shareholders. The 13E-3 Transaction Statement includes an explanation
of reasons for the going dark transaction, evaluation of the fairness of the transaction by the board of directors and
the chief executive officer, and often includes a fairness opinion by an independent expert (See Appendix A for an
example of a fairness evaluation in the 13E-3 filing).
3
worse upon deregistration for banks with stronger institutional monitoring as reflected in lower
post-Act deregistration announcement return.
SEC registration leads to benefits and costs. Reporting requirements and increased
disclosure are associated with lower information asymmetry and higher liquidity (Easley et al.,
2002; Leuz and Verrecchia, 2000), a larger shareholder base (Merton, 1987; Basak and Cuoco,
1998), lower cost of capital (Botosan, 1997; Hail and Leuz, 2006), and higher growth (Khurana
et al., 2006). However, stringent reporting standards are also associated with proprietary costs
(Verrecchia, 2001) and compliance costs (Zhang, 2007; Leuz et al., 2008; Piotroski and
Srinivasan, 2008). In addition, the broader disclosure requirements of registration can constrain
the acquisition of private benefits by insiders. For example, registered firms must file a Form 4
alerting outside investors to insider trades.3 Proxy statements required by registered firms allow
shareholders to monitor executive compensation and perk consumption. Absent these
disclosures, insiders can have greater latitude to exploit private benefits.
Registered firms that believe the costs of registration outweigh the benefits must also
consider transition costs that accompany deregistration. Transition costs are the costs incurred to
reduce the number of shareholders to be below the regulatory threshold including administrative
costs, legal costs, loss of equity capital, enhanced shareholder scrutiny, and political costs. For
example, stock buy-backs or reverse stock splits with cash payments to fractional shareholders
reduce bank equity capital. Such actions sever ties to local owners. 4 Local owners are a natural
constituency for the bank in its dealings with state agencies. They are also potential customers
3
Blackhawk Bancorp Inc. which deregistered in 2005 stated in the fairness opinion section of its 13E-3 filing: “The
factors that our board of directors considered as potentially negative for the unaffiliated shareholders that are
continuing shareholders included…the fact that continuing shareholders will lose certain protections currently
provided under the Securities Exchange Act, such as limitations on short-swing transactions by executive officers
and directors under Section 16 of the Securities Exchange Act.” Deregistering bank executives will no longer be
required to pay back profits made from insider trades within 6 months of the trade.
4
Surveys conducted by the American Bankers Associate (ABA) indicate that between 70% and 95% of community
bank shareholders are in-state.
4
and investors. By allowing a set of banks to deregister without reducing their shareholders, the
JOBS Act can significantly reduce the capital, political, and business costs and shareholder
scrutiny arising from deregistration for community banks.
Bank managers deciding whether to deregister likely compare the net benefits of
registering with the net costs. Banks with less need of share liquidity and potentially higher
private benefits from reduced oversight are more likely to deregister. More profitable banks with
higher growth prospects will be less likely to deregister for two reasons: First, these banks can
benefit from access to external financing opportunities available through registration. Second,
these banks wish to protect the rents generated from their franchise and do not wish to reduce the
political influence of local shareholders on state agencies.
The JOBS Act increases the size of deregistering banks and reduces transition costs
leading us to expect the following differences between pre and post-JOBS Act deregistrations.
First, private benefits are likely to have more influence in post-JOBS Act deregistrations.
Because the JOBS Act raised the deregistration threshold, banks with between 300 and 1200
shareholders of record need take no action to reduce the number of shareholders of record.
Corporate actions that reduce the number of shareholders of record require board input and a
13E-3 filing (Leuz et al., 2008). The scrutiny and legal liability engendered by the substantive
disclosures in this filing and the associated board oversight can dissuade firms from deregistering
for the sole purpose of private benefit capture.5 Moreover, continued regulatory oversight and
public reporting limit potential private benefits produced by deregistration (Leuz et al., 2008).
5
We checked whether 13E-3 filing rates differ between pre-and post-JOBS Act deregistrations. Among the 142 preJOBS Act deregistrations, 83 banks have shareholders of record above 300 in the year prior to deregistration and
most filed a 13E-3. The remaining 59 banks were below the deregistration threshold in the prior year and did not file
a 13E-3. In the post-Act period, none of our sample banks filed a 13E-3. Only two banks in our post-Act sample
exceed the 1200 deregistration threshold (Jeffersonville Bancorp and City National Bancshares Corporation) in the
year prior to deregistration (i.e., 2011) and these banks did not file 13E-3.
5
Thus, cases where private benefits exceed transition costs are likely fewer in the pre-JOBS Act
period where higher transition costs are involved for deregistration.6 Private benefits are also
increasing in firm size (Barclay and Holderness, 1989). By allowing larger banks to deregister
the JOBS Act likely opens the door to the pursuit of private benefits.
Second, pre-JOBS Act deregistrations involve smaller banks (less than 300 shareholders).
These banks tend to have thinly traded stocks and low liquidity benefits from registration.
Therefore, many pre-JOBS Act deregistrations are likely to occur because liquidity benefits fall
short of reporting costs. Third, profits and growth are likely important factors in pre-JOBS Act
deregistrations, because the high transition costs involved in pre-Act deregistration naturally
selects banks with significantly low growth in order to yield net benefits from deregistration.7
Profitable and growing banks benefit from external financing opportunities created by listing at
major exchanges and wish to maintain their investor base. In contrast, banks with fewer than
1200 shareholders are not required to sacrifice their investor base when deregistering after the
JOBS Act and, because they are larger, they have an expanded set of local shareholders from
whom to seek financing. Moreover, the other provisions in the JOBS Act ease raising capital
without registration, further mitigating concerns by a growing bank that it will be unable to
finance growth opportunities after deregistration.8 In short, profitable and growing banks
6
We assume that insiders internalize a significant fraction of transition costs.
Note declining growth does not necessarily coincide with shrinkage of shareholder base. However, low growth
firms are likely to face fewer costs when reducing their shareholder base. Therefore, existing deregistration
thresholds can lead to an observed correlation between growth and the deregistration decision. This selection ‘bias’
is absent when deregistration requirements are relaxed and firms finding themselves below the new cut-off
predominate in the deregistration sample.
8
The JOBS Act allows more companies to issue securities that can be traded on OTC platforms (e.g., OTC Markets)
in two ways. First, the JOBS Act improves marketing of private placements by permitting general solicitation and
advertising of Rule 144a and Regulation D Section 506 placements and these shares can be traded on OTC
platforms. Second, the JOBS Act increases the limit (to $50M) on financing that companies can raise in Regulation
A offerings. Like Section 506 placements, Regulation A securities can immediately trade on secondary OTC
markets. (Ryan, 2013).
7
6
deregistering in response to the JOBS Act face lower transition costs and growth/profitability
will be less influential in the deregistration decision.
We illustrate the differences between pre- and post-JOBS Act deregistration in Figure 2.
Panel A shows no evidence of a reduction in the number of shareholders in the year of JOBSAct-related deregistration. In contrast, banks deregistering prior to the JOBS Act show a decline
in the number of shareholders of record compared to control firms (Figure 2 Panel A). Consistent
with the discussion above, Figure 2 Panel B shows banks that deregister prior to the JOBS Act
exhibit lower asset growth than their counterparts that do not deregister. Such differences are not
seen for banks deregistering following the JOBS Act.
[Insert Figure 2 here]
Using a sample of banks consisting of both deregistering banks and non-deregistering
banks who are eligible to deregister given their number of shareholders of record, we study
banks’ decision to deregister both before and after the Act. 9 We gather data from an array of
sources. Banks’ financial information, insider trading, insider loans, and institutional holding
information are obtained from SNL. Price information is from Datastream and CRSP. In the
empirical analysis, we examine the determinants of bank deregistration decisions before and
after the Act. Consistent with our prediction, in the pre-Act period, we find that asset growth is
negatively and institutional ownership is weakly, negatively related to bank deregistration
whereas in the post-Act period, institutional holdings, largest holdings of a single institution and
the number of consistent block holders are strongly, negatively related and insider trading and
insider lending activities are positively related to bank deregistration. Institutional holdings,
particularly largest holdings of a single institution and the number of consistent block holders,
9
For deregistering banks before the Act, the comparison group consists of non-deregistering banks with fewer than
300 shareholders of record following Leuz et al. (2008). For deregistration after the Act, the comparison group
consists of non-deregistering banks with the number of shareholders between 300 and 1200.
7
and insider lending activities serve as proxies for agency concerns and insider trading activities
proxy for potential private benefits from deregistration (Leuz et al., 2008). Both pre- and postAct deregistrations are negatively correlated with prior year trading volume.
We investigate expected net benefits to shareholders by studying the stock market
reaction to the Act announcement. We focus on two event dates: March 8, 2012 when the
proposed bill (H.R. 3606) was passed in the House and March 22, 2012 when the proposed bill
was passed in the Senate. We find an insignificant market reaction to the announcement of the
Act for banks newly eligible to deregister (i.e., banks with shareholders between 300 and 1200).
However, we find some cross-sectional variation: banks with lower number of consistent block
holders have significantly lower announcement returns suggesting that investors are concerned
about executives’ pursuit of private benefits via deregistration for banks with higher ex ante
agency costs.
We also examine the stock market reaction to actual deregistration announcements.
Given that the Act contains many provisions, actual deregistration announcements, compared
with the Act announcement, are cleaner in identifying deregistration effects on shareholder
wealth. In the pre-Act period, banks experience a positive market reaction, which corroborates
the first set of results suggesting that banks go dark to save compliance costs while expecting
lower growth thus less need for external financing in the future. In contrast, we fail to find a
significant stock-price reaction to deregistration announcements after the passage of the Act.
This result suggests that post-JOBS Act deregistration is anticipated and/or that net shareholder
benefits are small. We also find some evidence that shareholders fared worse for post-Act
deregistering banks with higher institutional ownership, higher largest holdings of a single
institution, and larger number of consistent block holders. The evidence suggests that
8
shareholders are concerned about the reduced ability to monitor by institutional investors after
bank deregistration. Last, we analyze post-deregistration performance and lending activities. For
pre-Act deregistrations, we find an increase in ROA following deregistration consistent with
banks maximizing net benefits. We do not find a significant increase in ROA following post-Act
deregistrations. We find no change in lending activity for either the pre- or post-Act
deregistering banks following deregistration. On the whole, these results suggest that insider
opportunism plays a greater role in post-Act deregistrations compared to pre-Act deregistrations.
Our results shed light on how firms’ deregistration decision differs when transition costs
imposed by regulation are removed. We highlight that change in deregistration threshold can
alter the relative importance of economic forces that determine the costs and benefits of
deregistration, which will be of interest to policy makers who are keen to understand the
dynamics of these economic forces ex ante and to evaluate the economic consequences of a
policy ex post (the JOBS Act in particular).
The stated intention of the Act’s provision
increasing the deregistration threshold for banks was to reduce compliance costs for small
community banks and boost lending activities to better serve local communities. Our findings do
not support this stated objective.
The rest of the study is organized as follows. Section 2 provides institutional background
with respect to the JOBS Act and deregistration. Sample selection and descriptive statistics are
discussed in Section 3. Section 4 reports empirical results and Section 5 discusses additional
analysis. We conclude in Section 6.
2. Institutional background
2.1 Institutional background of JOBS Act
2.1.1 Timeline of the passage of the JOBS Act
9
The key dates for the advancement of the Act toward passage over 2011-2012 are as follows.
12/8/2011
3/1/2012
3/6/2012
3/8/2012
3/22/2012
3/27/2012
3/27/2012
4/5/2012
4/5/2012
Introduced in House
Reported (Amended) by the Committee on Financial Services.
Supplemental report filed by the Committee on Financial Services, H. Rept.
Passed/agreed to in House: On passage Passed by recorded vote: 390 - 23.
Passed/agreed to in Senate: Passed Senate with an amendment by Yea-Nay
Vote: 73 - 26.
Resolving differences -- House actions: On motion that the House suspend the
rules and agree to the Senate amendment Agreed to by the Yeas and Nays: (2/3
required): 380 - 41.
Presented to President.
Signed by President.
Became Public Law No: 112-106
Title V and Title VI of the Act amend Section 12(g) and Section 15(d) of the Exchange Act with
respect to bank deregistration and were first introduced in S.556 on March 10, 2011. Bills with
similar provisions were proposed on May 24, 2011 (H.R. 1965), Nov 8, 2011 (S. 1824), and Feb
24, 2012 (H.R. 4088). H.R. 1965 passed the House on November 2, 2011 with a 420 to 2 vote,
but was not submitted for a Senate vote. The remaining bills were not voted on by either the
House or the Senate. H.R. 3606 (Reopening American capital markets to emerging growth
companies Act of 2011) that includes these two acts was introduced in the House on Dec 8,
2011. This bill was finally contained in the JOBS Act package and passed the vote at the House
on March 8, 2012 (with a 390 to 23 vote) and the Senate on March 22, 2012 (with a 73 to 26
vote). These two key dates are bolded and used in the event study subsequently.
2.1.2 The JOBS Act provisions related to bank deregistration
Title V and Title VI of the JOBS Act amend Section 12(g) and Section 15(d) of the Exchange
Act with respect to bank deregistration in following key ways:


The holders of record threshold for Section 12(g) deregistration for banks and bank
holding companies is increased from 300 to 1,200 persons.
The holders of record threshold for the suspension of reporting under Section 15(d) for
banks and bank holding companies is increased from 300 to 1,200 persons.
10


2.2
If the class of equity security is held of record by less than 1,200 persons, the bank
holding company may file a Form 15 to terminate the Section 12(g) registration of that
class.
Pursuant to Section 12(g)(4), the Section 12(g) registration will be terminated 90 days
after the bank holding company files the Form 15. Until that date of termination, the bank
holding company is required to file all reports required by Exchange Act Sections 13(a),
14 and 16.
Deregistration
Under the Securities Exchange Act and the SEC’s rules, a company may choose to
terminate the registration of a class of securities if it has a class of securities registered under the
Securities Exchange Act of 1934 and if the securities have fewer than 300 holders of record, or
fewer than 500 holders of record and if the company’s total assets have not exceeded $10 million
at the end of the company’s three most recent fiscal years. Banks usually have total assets above
$10 million. Therefore, the threshold of 300 holders of record is the common binding constraint
to keep banks registered with the SEC.
The company deregisters a class of securities by filing Form 15. The SEC has up to 90
days to approve or deny the termination of registration. If a company deregisters all of its
securities, its duty to file any reports is effectively suspended under Section 13(a) of the 1934
Act (which includes Form 10-K, 10-Q, 8-K, proxy statements, form 4 (insider trading)), and the
company is no longer subject to the Sarbanes-Oxley Act and the SEC rules promulgated
thereunder. Deregistration thus not only dampens the amount of financial information provided
to outside shareholders, it also weakens the protection available to these investors (particularly
after SOX).
A company whose number of the shareholders of record exceeds the deregistration
threshold, can take one of three approaches to shrink its shareholders of record below the
threshold and deregister. First, the company can conduct a reverse stock split, and distribute cash
11
in lieu of fractional shares. A sufficiently large split ratio cashes out investors owning a small
number of shares. This approach requires shareholder approval. The firm must also file a proxy
statement and a Schedule 13E-3 which must be reviewed by the SEC prior to the solicitation of
shareholder consent. In many cases, shareholders are permitted to purchase shares prior to the
split to avoid the cash out. Second, the company can conduct a self-tender offer, whereby the
company offers to repurchase its shares pursuant to SEC rules. This approach also involves filing
Schedule 13E-3. It also allows outside shareholders the choice of whether or not to tender their
shares. However, this approach does not guarantee that the number of record holders will fall
below the required level. Third, the company can seek shareholders’ approval to convert a class
of common stock to another class by amending its articles of incorporation. For example, First
Ipswich Bancorp filed an application for deregistration on January 2, 2008. The company
reclassified some of its common stock into a preferred stock, allowing existing shareholders to
retain their investment in the company’s stock and at the same time meet the deregistration
requirement. This procedure also requires 13E-3 filing and SEC review to ensure that the rights
of the new differ substantively from the previous class. Upon SEC approval, all reporting
requirements cease as long as the number of shareholders of record remains below the 300
threshold. If a company wishes to re-register with the SEC after deregistration, it must file a
Form 10 together with other suspended reporting requirements for the period since the
deregistration, for SEC review.
If the company’s stock has been listed on a major exchange, such as on the NYSE or
NASDAQ, or quoted on the OTC Bulletin Board (OTCBB), the company may have to apply to
12
delist its stock from these exchanges first. After delisting, the stock will no longer be quoted in
these markets but will be eligible for quotation on the Pink Sheets or OTC Markets.10
2.3 Existing literature
Our paper is related to prior research investigating deregistration. Bushee and Leuz
(2005) examine the economic consequences of SEC disclosure regulation mandating that
OTCBB firms comply with reporting requirements under the 1934 Securities Exchange Act.
They find that an overwhelming majority (76%) of previously non-compliant firms do not meet
the new listing requirements and either go private or begin trading in the pink sheets. Consistent
with maximization of net listing benefits, non-compliant firms tend to have lower outside
financing needs. Leuz, Triantis and Wang (2008) also examine deregistration and find that SOX
increases going-dark activities and firms experience large negative abnormal returns when going
dark. The negative return could be driven by the revelation of private information about the
growth prospects of the firm. In addition, the decision to deregister is driven by poor future
prospects, distress and increased compliance costs after SOX. They find private control benefits
and the desire to decrease outside scrutiny also play a role in going-dark decision. However, they
show that the negative deregistration announcement return is not observed for banks. They
attribute this result to regulatory oversight and related filings that continue after deregistration
thereby limiting the availability of private benefits. In contrast, our findings suggest that
regulatory oversight is not a perfect substitute for SEC disclosure requirements: When transition
costs associated with deregistration diminish, more banks are motivated to go dark to take
advantage of private control benefits. Thus, our results imply opportunism can affect the goingdark decision even in a regulated industry. In this sense, our findings corroborate Granja (2012)
who documents that the costs of failed banks born by tax payers are lower when banks register
10
Pink Sheets is an automated, real time electronic quotation service with quotes available via the internet.
13
with the SEC. Moreover, our findings and those in Leuz et al. (2008), taken in tandem, provide a
more complete picture of the economic forces that determine bank deregistration.
Our study is also related with Doidge, Karolyi and Stulz (2010), who study foreign firms’
deregistration decisions. They document that foreign firms with more agency problems have
more negative stock-price reactions surrounding the adoption of Rule 12h-6 in 2007, which
facilitates foreign firm deregistrations. They find foreign firms with lower sales growth are more
likely to deregister, consistent with maximization of the net financing benefits. They attempt to
distinguish between shareholder wealth maximization and private benefit extraction motives by
examining stock price reactions to deregistration announcements. However, few variables
proxying for cross-sectional variation in these factors are consistently loaded. We complement
Doidge et al. (2010) with results showing that firms in a regulated industry and a country
perceived to provide investors with strong legal protection are still prone to agency issues if the
opportunity arises.
Mitts (2013) examines the effect of the deregistration threshold change under the JOBS
Act on bank operating performance. His findings are mixed: Pretax expenses decrease while
ROA increases significantly after the Act; non-interest expenses decreases marginally only
around certain data window and the efficiency ratio does not change. More interestingly, he finds
a significant increase in legal, accounting and audit expenses. Though we find some evidence
that the deregistration decision is related with saving compliance costs for more thinly traded
banks, we find that agency costs play a more prominent role in the decision process suggesting
that the Act may have the unintended consequence of increasing opacity and allowing insiders to
transfer wealth from inactive investors.
3. Sample selection and descriptive statistics
14
We obtain a sample of bank deregistrations from January 2002 to October 2012 from
SNL Financial.11 We constrain our sample period to end in October 2012 to focus our attention
on banks that are below the 1200 shareholder threshold. For these banks, the transition costs are
likely small.12 The majority of deregistering banks are bank holding companies for both the preand post-JOBS Act samples. Approximately ten percent of deregistering banks are commercial
banks.13 SNL also provides banks’ financial information, number of shareholders of record,
institutional ownership, insider trading, and insider lending information.14 SNL obtains the
financial data from SEC disclosures, the Y-9C for bank holding companies and call reports for
commercial banks. Stock price and volume data are obtained from CRSP, and where unavailable,
from Datastream. For the pre-Act sample, we identify 1,229 bank-years from 2002 to 2011 in
which the number of shareholders of record is less than 300. Of these bank-years, 189 come
from banks that ultimately deregister and the remaining serve as the non-deregistering
benchmark bank-year observations. Requiring financial data yields a sample of 990 bank-years
with 142 corresponding to deregistrations. For the post-Act sample, we identify 360 banks with
the number of shareholders of record between 300 and 1,200, 92 of which ultimately
deregistered. The remaining 268 non-deregistering banks are used as the benchmark group. Our
post-Act sample is further limited to 319 banks (89 deregistering) with financial data. For our
stock return tests around the JOBS Act announcement, we obtain stock price data for 323 banks
11
The list of bank deregistrations from SNL includes only banks and thrifts that deregistered their securities and/or
deregistered from reporting requirements under the Securities Exchange Act of 1934 and continued to operate as
independent companies following the deregistration. In other words, the list excludes banks that deregistered
because of a merger or bankruptcy.
12
If we extended our sample period to 2013, our sample would be more likely to include banks that had more than
1200 shareholders in 2011. These banks are more similar to pre-Act de-registrants in that they must take actions to
meet the deregistration threshold. In other words, the eligibility of deregistration for these banks is no longer
exogenous and these banks likely incur transition costs in the process of deregistration.
13
We do not distinguish bank holding companies from commercial banks in this study and refer them to as banks as
a whole. Bank holding companies file with the SEC. The majority of commercial banks file with the FDIC, but the
reporting requirements for registered banks are identical.
14
For bank holding companies, we collect insider lending information for their subsidiaries that are commercial
banks because insider lending information is only required to be reported for commercial banks in their call reports.
15
(74 deregistering) in the post-Act period. The cross sectional tests further reduce the sample size
depending on the availability of financial information.
Table 1 provides descriptive statistics on bank characteristics in the fiscal year preceding
deregistration for our pre-Act and post-Act samples in Panel A and Panel B, respectively. We
winsorize all financial variables at the 1st and 99th percentiles, except for those that are naturally
bounded or log-transformed such as firm size. All variables are defined in Appendix B. In Panel
A, compared with non-deregistering banks, deregistering banks have lower institutional
ownership (INSTOWN), lower largest holdings by a single institution, similar number of
consistent block holders, insider trading (INSIDERTRAD) or insider lending activities
(INSIDERLOAN), lower total assets, a larger number of shareholders of record
(NUMSHAREHOLDERS), lower asset growth, and lower trading volume (VOL) compared with
non-deregistering banks.
Moreover, 59% of deregistering banks have greater than 300
shareholders of record (GT300) in the year prior to deregistration compared to only 9% for the
benchmark banks. This is consistent with the anecdotal evidence that deregistering banks shrink
their shareholder base to be eligible for deregistration. It also suggests that banks possibly bear
significant transition costs to deregister before the JOBS Act. We also observe that deregistering
banks are more likely to be traded on the OTCBB and less likely to be traded on the NASDAQ
prior to deregistration. This exchange difference is consistent with the fact that deregistering
banks have lower trading volume, indicating that pre-Act deregistering banks might have lower
liquidity needs and thus lower net registration benefits.
In Panel B for the post-Act sample, deregistering banks have lower institutional
ownership, lower largest holdings by a single institutional investor, fewer consistent block
holders, more insider lending activities, lower trading volume relative to the benchmark banks,
16
and smaller size in total assets. Deregistering banks are also less likely to be listed on the
NASDAQ and more likely to be quoted on the OTCBB and PINK sheets in the year prior to
deregistration. We also observe that deregistering banks in the post-Act sample are larger in
total assets and their shareholder base is also larger compared with the pre-Act deregistering
banks. Both facts are likely attributable to the increased deregistration threshold for these banks.
However, institutional ownership is smaller for the post-Act deregistering banks (1.22 percent)
compared with 2.99 percent for their counterpart in the pre-Act sample though non-deregistering
banks show the opposite pattern (institutional ownership is much larger for the post-Act
benchmark banks than for the pre-Act sample). A similar pattern is observed for the largest
holdings by a single institution and the number of consistent block holders. Institutional
investors, particularly the single institution that has the largest holdings and consistent block
holders defined as institutional investors who are block holders for at least consecutive five
years, likely provide oversight and reduce agency problems. The widened spread in institutional
ownership between deregistering banks and their benchmark banks in the post-Act period
suggests that private benefit motives play a more important role in the deregistration decision.
Another observation is that banks do not shrink their shareholder base prior to deregistration in
the post-Act period. The percentage of firms with greater than 1,200 (GT1200) shareholders of
record (i.e., the new deregistration threshold) in the prior year is only 2.2 percent and is not
significantly different from the non-deregistering banks (3.9 percent). This result supports our
argument that the Act offers a shock to a bank’s deregistration opportunity that is exogenous to
changes in a bank’s characteristics. In particular, it breaks the correlation between changes in
firm characteristics that facilitate reductions in shareholders of record and deregistration
likelihod that is likely to be found in pre-JOBs Act deregistrations. Deregistering banks display
17
similar asset growth and financing deficits compared to their benchmark banks though the SOX
announcement return (CARSOX) is statistically higher for deregistering banks, which goes
against the commonly quoted explanation that saving compliance costs motivates the
deregistration decision. Overall, the univariate results in Table 2 suggest that lower future growth
prospects is an important determinant of deregistration prior to the Act while private benefits and
agency conflicts are a more important motivation for deregistration under the JOBS Act.
[Insert Table 1 here]
Table 2 displays Pearson and Spearman correlations among variables used in the
subsequent analysis above and below the diagonal, respectively, with correlation coefficients
bolded if significant at the five percent level or lower. Panel A shows correlations for the pre-Act
sample. Deregistration (DEREG) is negatively correlated with firm size (TOTALASSETS), asset
growth (ASSET_GROWTH), and trading volume (VOL) while positively correlated with bookto-market (BTM), and an indicator if the number of shareholders of record is greater than 300
prior to deregistration (GT300). Deregistration is negatively correlated with institutional
ownership (INSTOWN), largest holdings by a single institution (LARGEST INSTOWN), but
unrelated with the number of consistent block holders (CONSISTENT BLKHOLDERS). Firm
size (SIZE) is positively correlated with institutional ownership, asset growth, return on assets
(ROA), insider lending (INSIDERLOAN) and trading volume (VOL). SOX announcement
return (CARSOX) is negatively correlated with institutional ownership, return on assets, stock
return, and book-to-market. The large correlation coefficients between firm size and trading
volume raise a multicollinearity concern, which will be discussed in the subsequent analysis. For
the post-Act sample reported in Panel B, we observe similar patterns except that deregistration is
significantly negatively correlated with the number of consistent block holders, uncorrelated with
18
asset growth, and positively correlated with insider lending. We also observe a significant
negative correlation between institutional ownership (largest holdings by a single institution) and
insider lending, providing some credence to the idea that the two proxies are overlapping
measures of agency concerns.
[Insert Table 2 here]
4. Empirical results
4.1 Bank deregistration decision
Table 3 reports results of the determinants of the bank deregistration decision for the preAct and post-Act subsamples in Panel A and Panel B, respectively. In Panel A, we estimate
seven model specifications following Leuz et al. (2008) and Doidge et al. (2010). Column (1)
yields the baseline estimates. The coefficient estimates indicate that banks with lower
institutional ownership, smaller size, more than 300 shareholders of record in the year prior to
deregistration, lower asset growth, and lower trading volume are more likely to deregister in the
pre-Act period. However, when the largest holdings by a single institution and the number of
consistent block holders serve as the proxy for agency costs in columns (2) and (3), the
coefficient loses significance. Compared with the largest holdings by a single institution or the
number of consistent block holders which more likely capture institutional monitoring15,
institutional ownership may partially reflect stock liquidity. Therefore, the difference in the
coefficient estimate on AGENCYCOSTS between the first column and the next two columns
15
For example, BlackRock Inc., an investment fund known for investor activism, is a block holder (greater than 5%
ownership) of 22 banks eligible to deregister under the JOBS Act, 4 of which it has held consistently for the past
five years. None of these banks deregistered after the JOBS Act. In addition, it is one of the top three institutional
owners for an additional 29 banks, none of which deregistered after the JOBS Act. According to Michelle Edkins,
BlackRock manager, “… We are the ultimate long-term investor on behalf of our clients. Our clients’ shareholdings
will outlast many boards of directors.”
19
may be driven by the difference in liquidity between deregistering and non-deregistering banks.
In columns (4) and (5), agency costs are proxied by insider trading and insider lending. Insider
trading is measured as the natural logarithm of the dollar value of trades by the CEO in the prior
year divided by the dollar value of trading volume and proxies for private benefits to insiders.
Insider lending is measured as an indicator variable equal to 1 if the bank had loans outstanding
to executive officers, directors, or principal shareholders16 at any time during the previous three
years.17 We use insider lending as a proxy for agency concerns in line with Jayaratne and
Strahan (1996) who find that banks exhibit lower improvement in performance after banking
industry deregulation when they lend more to insiders. 18 The coefficients on both insider trading
and insider lending are statistically indistinguishable from 0. Therefore, banks that deregister in
the pre-Act period are partially motivated by lower growth opportunities and lower external
financing needs. To evaluate the economic effect of asset growth on the deregistration decision,
we focus on the results reported in column (1). When asset growth increases from the 25th
percentile (0.05) to the 75th percentile (0.38), the probability of deregistration decreases by 2.5%
from 9.2% to 6.7%.
In columns (6) and (7), we include prior year stock returns and SOX announcement
return, respectively. We find insignificant coefficients on each of these variables suggesting
prior stock performance and SOX compliance costs do not affect the deregistration decision.
Overall, the multivariate results are consistent with those shown in the univariate analysis in
Tables 1 and 2.19
16
Regulation O defines a principal shareholder as one who has the power to vote more than 10 percent of the stock
of the bank.
17
Our results are similar if we use the ratio of insider loans to total loans.
18
Anecdotes suggest that insider loans are correlated with unprincipled behavior (e.g., Seemuth 2011).
19
We check the Variance Inflation Factor for both the pre-Act and post-Act determinants models and find a VIF of
3.15 (1.44) for the pre- (post-) Act sample. We conclude that multicollinearity does not significantly affect our
estimates.
20
In Panel B for the post-Act sample, a different set of results emerges: In particular,
largest holdings of a single institution, the number of consistent block holders, insider trading,
and insider lending become significant factors while asset growth loses its significance in
explaining the deregistration decision. More specifically, banks with lower largest holdings by a
single institution and fewer consistent block holders but higher insider trading activities are more
likely to deregister. We also find evidence that banks with insider lending activity are more
likely to deregister, though this coefficient is only marginally significant. Again we find banks
are less likely to deregister when trading volume is high. Given that the largest holdings by a
single institution and the number of consistent block holders (conditional on trading volume)
reflect the strength of external corporate governance, insider trading activities
represent
management self-interest and insider lending is an indicator of agency costs, and these four
variables are significant determinants of the deregistration decision only for the post-Act sample,
we conclude that the JOBS Act allows banks to deregister to secure private benefits by escaping
the capital market oversight and legal liability that accompanies registration.
We use the results of Panel B in column (2), where the largest holdings by a single
institution serves as the proxy for agency costs, to examine the economic significance of agency
costs on the deregistration decision given that institutional ownership might be an inferior proxy
for monitoring as discussed previously. When the largest holdings by a single institution
(LARGEST INSTOWN) increases from the 25th percentile (0) to the 75th percentile (1.42%), the
probability of deregistration decreases by 18% from 25% to 7%. In column (4), when insider
trading activities (INSIDERTRAD) increases from the 25th percentile (0) to the 75th percentile
(0.71), the probability of deregistration increases by 2% from 13% to 15%. In column (5), when
21
insider lending (INSIDERLOAN) increases from 0 to 1, the probability of deregistration
increases by 10% from 10% to 20%.
[Insert Table 3 here]
While we argue that banks with more insider trading activities benefit more from
deregistration to avoid the SEC oversight (e.g., Form 4 filing), it is also possible that insider
trading can be adversely affected by deregistration if going dark reduces stock liquidity, which
may limit their ability to trade (Hong and Huang, 2005). To check this possibility, we test
whether trading volume declines after bank deregistration under the Act. Compared with nonderegistering banks, deregistering banks experience a significant increase in trading volume in
the post-deregistration period where the sample period is from 2009 to 2012. Therefore, at least
under the Act the concern of a drop of liquidity should not deter banks from deregistration.
Consequently, the positive correlation between insider trading activity and the likelihood of
deregistration more likely reflects insiders’ pursuit of private benefits.
We measure insider trading activities using only CEO trading information because the
inside information of the CEO is likely to dominate that of other executives (Graham and Harvey
2002). To investigate whether this is the case, we include non-CEO executive trading activities
in the deregistration decision regression. Untabulated results show that CEO trading activities
continue to load significantly, similar to those reported in Table 3. However, the coefficient on
non-CEO executive trading activities is insignificant in all specifications.
4.2 JOBS Act announcement
22
In this section we examine the market reaction to relevant JOBS Act announcement
dates. If saving compliance costs motivates banks’ deregistration decisions, we expect a positive
market reaction assuming the market at the time off passage anticipates which banks will
exercise the newly granted option to deregister under the Act. However, SOX compliance and
other SEC reporting requirements also reduce agency costs and reducing deregistration transition
costs would lead to an expected wealth transfer from minority shareholders to insiders. This
effect would be more pronounced for firms with poor governance. We calculate cumulative
abnormal returns (CAR) for banks newly eligible to deregister under the JOBS Act on two key
Act announcement dates. The first is the passage of the Act in the House of Representatives on
March 8, 2012 and the second is the passage of the Act in the Senate on March 22, 2012. We do
not include the announcement dates for prior acts that also mentioned the increase in the bank
deregistration threshold (see section 3.1), because no legislators took subsequent actions
suggesting the ultimate passage of the initial proposals was unlikely. To ensure our results are
robust, we also analyze the cumulative returns on the announcement dates of these prior acts.
Following Leuz et al. (2008), we estimate the CAR for three event windows: (i) the day
of and the day following the event date [0,1], (ii) the day of and the two days following the event
date [0,2], and (iii) the day of and the five days following the event date [-5,5]. We extend the
event period to a maximum of five days to allow for a delayed price reaction, because the shares
of our sample banks exhibit light trading. Abnormal returns are calculated using size tercile
returns of a self-constructed NASDAQ bank index, which includes all banks traded on the
NASDAQ in the same tercile as our sample banks but excluding those in our sample. We also
present abnormal returns computed using size decile portfolio returns of the equally weighted
23
market index. The results are similar for both methods. In untabulated analysis, we also adjust
for the beta of each stock to the index and find similar results.20
Table 4 Panel A presents the results of the JOBS Act announcement CAR tests. We find
no significant stock price reaction for these banks on the JOBS Act announcement dates for both
industry-size adjusted and equally weighted size-adjusted CAR. However, the stock-price effect
of the Act’s passage can vary with bank characteristics. We therefore test the cross sectional
variation in the Act announcement CAR in Panel B. Across six specifications (column (1)column (6)), only asset growth is consistently loaded with significant, positive sign, suggesting
that firms with higher past growth benefit more from the passage of the Act. Among the five
agency costs proxies, only the number of consistent block holders is loaded significantly with a
positive sign.
In column (7), we include CARSOX to test whether firms with greater reporting costs
experience higher abnormal returns when given the opportunity to deregister.
The data
availability for calculating CARSOX reduces the sample size significantly. We find a positive
and marginally significant relation between CARSOX and the Act announcement CAR for the
average bank, which does not support the argument that banks with high compliance costs
benefits from the Act. Taken together, results in Table 4 suggest that the JOBS Act might
benefit well-governed firms and firms with higher growth. As JOBS Act contains many
provisions21 and the deregistration threshold change for banks is only one of these provisions, it
is not surprising that we do not find that firm characteristics that predict deregistration decision
20
We also use a portfolio approach as in Doidge et al. (2010) and find similar results that are not tabulated.
There are seven major provisions in the bill: 1) Increase the threshold for firms to register with the SEC; 2)
Provide a new exemption from the requirement to register public offerings with the SEC for certain types of small
offerings; 3) Relieve “emerging growth companies” from certain regulatory and disclosure requirements (one
significant relief is SOX 404); 4) Lift the ban on “general solicitation” and advertising in specific kinds of private
placement of securities; 5) Raise the limit for securities offerings exempted under Regulation A from $5 million to
$50 million; 6) Raise the number of permitted shareholders in community banks from 500 to 2,000. Deregistration
threshold change for banks is part of this provision; 7) Prohibit the crowdfunding of investment funds.
21
24
are associated with the Act announcement return. It also highlights that focusing on eventual
bank deregistration might help us understand the economic consequence of the deregistration
threshold change.
As discussed in Section 3.1, the deregistration-threshold change for banks was proposed
by several bills though only H.R. 3606 became law. To ensure our lack of results for stock price
reactions to the JOBS Act announcement are robust, we conduct similar analysis for all the
relevant dates when the failed bills were initially proposed. In untabulated analyses, we find
insignificant market reactions for all relevant event dates.
[Insert Table 4 here]
4.3 Stock-price reaction of deregistering banks to their deregistration announcements
We now turn to the stock-price reactions around banks’ deregistration announcements.
We follow the procedure outlined in the previous section to compute cumulative abnormal
returns around the deregistration announcement dates. The deregistration announcement is
defined as the earliest of either the filing of Form 13E-3, the filing of Form 15, or the
announcement of the intention to deregister to the public. We search the SNL website for news
articles containing the announcement of the intention to deregister to the public for our
deregistering banks.22
Table 5 presents the CAR for the actual deregistration announcements in Panel A and the
results for cross-section tests in Panel B and Panel C, respectively. We find a significantly
positive CAR for the pre-Act deregistration announcements ranging from 1.4% to 3.7%
depending on the window and the index used to adjust the return. We find no significant stock
22
We have also randomly selected 52 banks that deregistered over the period of 2002-2012. We search Factiva for
their deregistration announcement dates and compare these dates with those from SNL. We cannot find the
announcement date for 11 banks. Among 7 banks whose announcement dates differ between SNL and Factiva, 4
cases have Factiva dates preceding SNL dates by one to two days. Given that one of our abnormal returns is
measured over (-5,+5) window, the one or two-day difference should not be a concern.
25
price reaction to the deregistration announcements under the Act suggesting deregistration under
the Act did not benefit bank shareholders or the net benefits are too small to be detected. The
positive market reaction to bank deregistration could indicate that investors expect deregistering
banks to be acquired in the near future. To rule out this possibility, we obtain merger and
acquisition announcement dates for all banks acquired over the sample period from SNL. No
(two) deregistering banks are acquired in the six months window after deregistration in the pre(post-) Act sample. Therefore, it is unlikely that the positive market reaction upon deregistration
announcements reflects investors’ anticipation of being acquired.
In Panel B, we conduct cross-sectional tests for the deregistration announcement return
for the pre-Act deregistration sample similar to those reported in Table 4 Panel B. We find ROA
is consistently loaded with a positive sign in the pre-Act deregistration sample, suggesting that
more profitable firms benefit more from deregistration possibly due to saving compliance costs.
However, we don’t observe SOX announcement return to be significantly related with
deregistration announcement return. In Panel C, when we focus on the post-Act deregistration
sample, we find that several agency costs proxies (institutional ownership, highest institutional
ownership and consistent block holders) are significantly loaded with a negative sign. These
results suggest that investors are fared worse off from bank deregistration possibly due to the
resulting reduced ability for institutional investors to monitor. We don’t find ROA nor SOX
announcement return to be related with deregistration announcement return and asset growth
only shows significant loading in column (6). Overall, the results in Table 5 corroborate those
presented in Tables 3 and 4 that bank deregistration decisions under the JOBS Act likely stem
from private benefits motives.
[Insert Table 5 here]
26
4.4 Bank post-deregistration performance
Due to constraints on the availability of post-deregistration data as of the writing of this
draft, we perform tests of post-deregistration performance up to Q4 2012 for banks that
deregistered after the passage of the Act. We analyze two aspects of performance: (i) accounting
performance (ROA) and (ii) lending activities.23 The set of regressors included in these tests
consist of a deregistration indicator equal to 1 for banks that deregistered over the sample period
and 0 for non-deregistering banks; an indicator variable, POST, equal to 1 for the periods after
deregistration, and 0 otherwise (this variable is set to 0 for all non-deregistering banks); asset
growth, bank size and tier 1 capital ratio. We also include year-quarter fixed effects to account
for inter-temporal variation in the variable of interest. We estimate these models using OLS with
robust standard errors clustered at the bank level.
4.4.1 Accounting performance
For the pre-Act sample, the first column of Table 6 Panel A focuses on return on total
assets (ROA) which serves as the dependent variable. The coefficient on the variable of interest,
POST, is positive and statistically significant at the one percent level, suggesting that bank
performance increases significantly after deregistration before the Act. The coefficient on the
deregistration indicator is insignificant implying that prior to deregistration, deregistering banks
are not different from non-deregistering banks in accounting performance. Asset growth and tier
1 capital are not associated with bank performance while large banks perform better on average.
For the post-Act sample reported in Panel B, the coefficient on POST is negative but
statistically insignificant possibly due to low power to detect any change since fewer
23
We also examined whether non-interest expenses change after deregistration for both the pre- and post-Act
sample. Non-interest expenses include salaries and employee benefits and expenses of premise and fixed assets such
as regulatory inspection expenses and legal fees etc. We no find no significant changes for both pre- and postderegistration samples.
27
observations fall in the post-Act period. Asset growth, firm size and tier 1 capital ratio are all
positive implying that banks with higher growth, larger size, and higher tier 1 capital ratio
perform better for this sample of banks. Overall, we find that banks perform better after
deregistration in the pre-Act period but the effect vanishes for banks deregistering after the Act.
These results again reinforce prior findings that deregistration before the Act is more likely
motived by maximizing shareholder value than deregistration after the JOBS Act.
[Insert Table 6 here]
4.4.2 Lending activities
Many deregistering banks under the Act state that deregistration allows them to save
compliance costs and better serve the local community by increasing lending activity. Taken at
face value, we should expect an increase in loan value after deregistration under the Act.
However, if banks are financially unconstrained, compliance costs should not influence banks’
investment decisions. Therefore, if compliance costs affect lending activities, we expect this
effect is more likely to exist in financially constrained banks. We measures lending activity as
the total value of loan portfolio scaled by total assets. In the second column of Table 6 Panel A,
the coefficient on POST is negative but statistically insignificant for the pre-Act sample. When
we interact POST with financing deficit (FINDEF), we find an insignificant coefficient estimate
unreported. These results also hold for the sample under the JOBS-Act reported in Panel B. Asset
growth is positively while firm size and tier 1 capital ratio are negatively associated with loan
value. These results make sense because larger banks and banks with high regulatory capital
likely invest more (less) in risky trading securities (loans) with high (low) profit margin. We find
similar results in Panel B for the post-Act sample. Overall we do not find banks change their
28
lending behavior after deregistration. Due to data limitations, we caution that the insignificant
results for the post-Act sample might be caused by low test power.
5. Conclusion
This study examines bank deregistration in both the pre-JOBS Act and the post-JOBS
Act period. By increasing the threshold of the number of shareholders of record from 300 to
1200, the JOBS Act grants banks that meet this new threshold an option to deregister with
significantly reduced transition costs. We argue that this change shifted the equation of costs and
benefits in the deregistration decision. Specifically, we predict that growth opportunity is a more
dominant factor in pre-Act deregistration while private benefits/agency costs play a more
important role in post-Act deregistration. Consistent with our predictions, we find differences in
the factors that determine bank deregistration between the two periods. In the pre-Act period, we
observe banks with lower growth opportunities tend to deregister while in the post Act period
institutional ownership, largest holdings by a single institution and the number of consistent
block holders, insider trading and insider lending activities, proxies for private benefits and
agency concerns, are significant determinants for bank deregistration. We also find some
evidence that bank shareholders fared worse upon deregistration announcements when
institutional monitoring was present before deregistration. Overall, our study speaks directly to
whether regulatory oversight can be a perfect substitute for expanded SEC disclosure
requirement in mitigating agency concerns. Our findings suggest that these two are not
substitutive. Our results are informative to regulators concerned with the costs and benefits of
regulation, and individuals wishing to evaluate the consequences of the JOBS Act on bank
actions. Our findings highlight how changes in the regulation threshold affect transition costs and
thereby affect the constellation of forces that shape banks’ choice of whether or not to go dark.
29
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Appendix A: Example of a fairness evaluation in Form 13E-3 for Blackhawk Bancorp, Inc.
Blackhawk’s Position as to the Fairness of the Split Transaction
Based on a careful review of the facts and circumstances relating to the split transaction,
our board of directors believes that the split transaction and the terms and provisions of the split
transaction, including the cash to be paid to the non-continuing shareholders, are substantively
and procedurally fair to our unaffiliated shareholders. Our board of directors unanimously
approved the split transaction.
In concluding that the terms and conditions of the split transaction, including the cash to
be paid to the non-continuing shareholders, are substantively fair to our unaffiliated shareholders,
our board of directors considered a number of factors. In its consideration of both the procedural
and substantive fairness of the transaction, the board considered the potential effect of the
transaction as it relates to all shareholders generally, to non-continuing shareholders and to
continuing shareholders. Because the transaction will affect shareholders differently only to the
extent that some will be cashed out in the split transaction and some will retain their interest in
the company, these are the only groups of shareholders with respect to which the board
considered the relative fairness and the potential effects of the transaction. See “—Effects of the
Transaction on Shareholders of Blackhawk.”
The factors that our board of directors considered positive for all unaffiliated
shareholders, including both those that are continuing and non-continuing shareholders, included
the following:
 our smaller shareholders who prefer to remain as shareholders of Blackhawk, despite
the board’s recommendation, may elect to do so by acquiring sufficient shares so that
they hold at least 1,000 shares of common stock in their own names immediately
prior to the split transaction;
 beneficial owners who hold their shares in “street name,” who would be cashed out if
they were record owners instead of beneficial owners, and who wish to be cashed out
as if they were record owners instead of beneficial owners, can work with their
broker or nominee to transfer their shares into a record account in their own name so
that they will be cashed out; and
 shareholders receive limited benefit from us being an SEC-reporting company
because of our small size, the lack of analyst coverage, and limited trading of our
common stock.
In addition to the positive factors applicable to all of our unaffiliated shareholders set
forth above, the factors that the board of directors considered positive for the unaffiliated
shareholders that are non-continuing shareholders included:
 the cash price of $15.25 represents a 43.8% premium over our book value of our
common stock as of September 30, 2004;
 our common stock trades infrequently, with an average trading volume of
approximately 26,000 shares per month, or approximately 1.0% of our outstanding
common stock, a volume that the board felt did not provide our shareholders with
sufficient opportunity to easily obtain cash for their shares;
 the cash to be paid to them in the split transaction will provide certainty of value to
those shareholders and immediate liquidity for them; and
32

no brokerage or other transaction costs are to be incurred by them in connection with
the divesture of their shares.
In addition to the positive factors applicable to all of our shareholders set forth above, the
factors that the board of directors considered positive for the unaffiliated shareholders that are
continuing shareholders included:
 they will continue to have the opportunity to participate in our future growth and
earnings;
 they will realize the potential benefits of termination of registration of our common
stock, including reduced expenses as a result of no longer needing to comply with
SEC reporting requirements;
 the fact that we anticipate that our shares will continue to be traded on the OTCBB
after the split transaction, which will provide opportunities for continuing
shareholders to trade their shares in the future; and
 the two step structure of the split transaction will avoid disruption to holders of 1,000
or more shares of our common stock, who are not being cashed out in the
transaction, by avoiding the requirement that these shareholders forward their stock
certificates to the company for cash for fractional shares of common stock and
replacement stock certificates for whole shares of common stock.
Our board considered each of the foregoing factors to weigh in favor of the substantive
fairness of the split transaction to our unaffiliated shareholders, whether they are non-continuing
shareholders or continuing shareholders. In addition, although the board arrived at the $15.25
per share price, which represents a premium of 43.8% over our book value as of September 30,
2004, on the basis that it had, in consultation with its financial advisor, determined this amount
to be a fair value to be paid to non-continuing shareholders, the board also considered this pershare purchase price to be fair from the perspective of continuing shareholders, because, as
indicated above, the premium level was determined to be in line with that of comparable SECreporting companies. In addition, the board considered the purchase of shares in the split
transaction at this price to be the best use of the company’s excess capital. See “—Blackhawk’s
Reasons for the Split Transaction.”
The board is aware of, and has considered, the impact of certain potentially
countervailing factors on the substantive fairness of the split transaction to the unaffiliated
shareholders. In particular, the factors that our board of directors considered as potentially
negative for the unaffiliated shareholders that are non-continuing shareholders included:
 they will be required to surrender their shares involuntarily in exchange for the cashout price determined by the board without the opportunity to liquidate their shares at a
time and for a price of their choosing;
 they will not have the opportunity to participate in any of our future growth and
earnings; and
 they will be required to pay income tax on the receipt of cash in the split transaction.
The factors that our board of directors considered as potentially negative for the
unaffiliated shareholders that are continuing shareholders included:
 they will have reduced access to our financial information once we are no longer an
SEC-reporting company, although we do intend to continue to provide the
continuing shareholders with our annual reports and Blackhawk and the Bank will
continue to be subject to the filing requirements of our Federal and State regulatory
agencies;
33

the continuing shareholders will lose certain anti-takeover protections provided to
public companies under Wisconsin law, unless we subsequently adopt amendments
to our articles of incorporation electing to be covered by those statutes;
 the fact that future business partners might require more information from us before
entering into a business relationship due to the lack of publicly available information
about us;
 the fact that we may have a lower public profile in our community, which may be a
negative factor with some of our customers; and
 the fact that continuing shareholders will lose certain protections currently provided
under the Securities Exchange Act, such as limitations on short-swing transactions
by executive officers and directors under Section 16 of the Securities Exchange Act.
Our board of directors believes that these potentially countervailing factors did not,
individually or in the aggregate, outweigh the overall substantive fairness of the split transaction
to our unaffiliated shareholders, whether they be continuing or non-continuing shareholders and
that the foregoing factors are outweighed by the positive factors previously described.
We believe that the split transaction is procedurally fair to our unaffiliated shareholders,
including those that are continuing shareholders and those that are non-continuing
shareholders. In concluding that the split transaction, including the cash to be paid to the noncontinuing shareholders, is procedurally fair to our unaffiliated shareholders, the board of
directors considered a number of factors. The factors that our board of directors considered
positive for all unaffiliated shareholders, including both continuing and non-continuing
shareholders, included the following:
 the split transaction is being effected in accordance with all applicable requirements
of Wisconsin law;
 our board of directors is primarily comprised of independent members, and,
accordingly, there was no need to form a special committee or retain any unaffiliated
representative(s) to represent unaffiliated shareholders, as the board was able to
adequately balance the competing interests of the non-continuing shareholders and
the continuing shareholders in accordance with their fiduciary duties. Although all
but two of our board members do own stock in Blackhawk, and are required by our
bylaws to own 3,000 shares within three years of becoming a director, the 1,000
share cutoff set in the split transaction was determined without regard to the
directors’ share ownership, and as this represented the sole potential conflict of
interest and the board members will be treated identically to all other shareholders in
the split transaction, the board did not feel that any additional protections that may be
afforded by a special committee would be significant;
 the board obtained a valuation report and fairness opinion from an independent third
party concerning our common stock, and the board imposed no limitations upon
Prairie Capital with respect to the investigation made or procedures followed in
rendering its valuation report and fairness opinion;
 the board retained and received advice from legal counsel in evaluating the terms of
the split transaction;
 management and the board considered alternative methods of effecting a transaction
that would result in our becoming a non-SEC reporting company, each of which was
determined to be impractical, more expensive than the split transaction, or potentially
ineffective in achieving the goals of providing cash and value to the non-continuing
34
shareholders as soon as possible and eliminating the costs and burdens of public
company status;
 shareholders will have the opportunity to determine whether or not they will remain
shareholders after the split transaction by acquiring sufficient shares so that they hold
at least 1,000 shares immediately prior to the split transaction or selling sufficient
shares so that they hold less than 1,000 shares immediately prior to the split
transaction, so long as they act sufficiently in advance of the split transaction so that
the sale or purchase is reflected in our shareholder records by the close of business
(local time) on the effective date of the split transaction; and
 Blackhawk had sufficient cash resources to undertake the necessary actions to
finance the split transaction.
The board of directors considered each of the foregoing factors to weigh in favor of the
procedural fairness of the split transaction to our unaffiliated shareholders, whether they are
continuing or non-continuing shareholders.
The board is aware of, and has considered, the impact of the following potentially
countervailing factors, which affect both continuing and non-continuing shareholders to the same
degree, on the procedural fairness of the split transaction:
 although the interests of the continuing shareholders are different from the interests
of the non-continuing shareholders and may create actual or potential conflicts of
interest in connection with the split transaction, neither the board nor any of the
directors retained an independent, unaffiliated representative to act solely on behalf
of the non-continuing, shareholders for the purpose of negotiating the terms of the
split transaction or preparing a report concerning the fairness of the split transaction;
 the transaction is not structured to require approval of at least a majority of
unaffiliated shareholders; however, we determined that any such voting requirement
would improperly usurp the power of the holders of a majority of our outstanding
shares to consider and approve the proposed amendment as provided in our articles
of incorporation and under Wisconsin law;
 no appraisal or dissenters’ rights are available under Wisconsin law to shareholders
who dissent from the split transaction;
 we did not solicit any outside expressions of interest in acquiring the company; and
 we did not receive a valuation of our common stock by a second independent
appraiser, in addition to the valuation report prepared by Prairie Capital, even though
the receipt of recommendations from two independent appraisers with respect to the
consideration to be paid in the split transaction may result in a presumption that the
consideration was fair under Wisconsin law.
The board of directors believes that the foregoing potentially countervailing factors did
not, individually or in the aggregate, outweigh the overall procedural fairness of the split
transaction to our unaffiliated shareholders, whether they are continuing or non-continuing
shareholders, and the foregoing factors are outweighed by the procedural safeguards previously
described. In particular, with reference to the lack of a special committee, the board felt that the
consideration of the transaction by the full board, whose sole conflict of interest is a relatively
insignificant increase in aggregate share ownership following the split transaction and who will
be treated identically to unaffiliated shareholders in the split transaction, was a sufficient
procedural safeguard that made it unnecessary to form a special committee or retain an
independent fairness advisor.
35
In addition, with respect to the determination not to seek a second opinion on
valuation, our board felt that the valuation coupled with the fairness opinion to be given by
Prairie Capital provided sufficient procedural safeguards with respect to the cash to be paid
to the affiliated and unaffiliated non-continuing shareholders, and determined that it would be
unnecessary to incur the additional cost associated with obtaining a second recommendation
from a second independent appraiser, particularly given that the possible presumption of fairness
under Wisconsin law would be rebuttable by any shareholder presenting contrary evidence.
Because shareholders will have the opportunity to adjust their share ownership levels and
thereby elect whether or not to remain a shareholder, the board did not consider the absence of
appraisal rights to be a significant factor with respect to the split transaction.
We therefore believe that the split transaction is substantively and procedurally fair to our
unaffiliated shareholders, including those that are continuing shareholders and those that are noncontinuing shareholders, for the reasons and factors described above. In reaching this
determination, we have not assigned specific weights to particular factors, and we considered all
factors as a whole. None of the factors that we considered led us to believe that the split
transaction is unfair to our unaffiliated shareholders, whether they are continuing or noncontinuing shareholders.
No unaffiliated person has made any offer during the past two years regarding our merger
or consolidation with or into such person, for the sale or other transfer of all or any substantial
part of our assets, or for the purchase of a controlling number of shares of our common stock.
In evaluating the $15.25 per share that unaffiliated, non-continuing shareholders will
receive in the split transaction, the board considered whether this constitutes fair value in relation
to current and historical (including recent) market prices, net book value, going concern value,
and the valuation report and fairness opinion of Prairie Capital. In particular, the board was
aware that our common stock, during the two years prior to its consideration of the split
transaction through the quarter that ended immediately prior to its approval of the transaction,
traded in the range of $8.25 to $14.00 and during the period from October 1, 2004 through
October 20, 2004, the date of its approval of the transaction, was trading in the range of $11.90
to $12.50 and on October 20, 2004, was trading at $12.00 per share (see “Market Price of
Blackhawk Common Stock and Dividend Information—Comparative Market Price Data) and
therefore the $15.25 price represents an approximate 9.0% to 85.0% premium over those market
prices during the two years prior to its consideration of the transaction, an approximate 22% to
28% premium over those market prices during the period from October 1, 2004 through October
20, 2004, and an approximate 27% premium over the market price on October 20,
2004. However, given the low trading volume of our common stock, the board recognized that
our current and historical market prices may not be the most meaningful indication of value. As
discussed above, the board considered the fact that the $15.25 cash price represents a 43.8%
premium over our book value as of September 30, 2004, to be a factor weighing in favor of the
split transaction.
In evaluating the $15.25 share price in relation to our independent going concern value
for purposes of determining the fairness of the split transaction, our board noted that fair value as
determined under Wisconsin law takes into account the shareholders’ proportionate interest in
the company as a going concern, prior to taking the corporate action. Therefore, with respect to
this factor, we relied upon the financial analyses performed by Prairie Capital, which calculated a
range of fair values of our common stock, utilizing comparable peer group analysis, comparable
transactions analysis and discounted dividend analysis, among other analyses. Prairie Capital’s
36
analyses are summarized in “—Valuation of Financial Advisor; Fairness Opinion.” We
expressly adopt the analyses and conclusions of Prairie Capital set forth in its valuation report
and fairness opinion, and have relied on these analyses in making our fairness determination as
described in this proxy statement.
In reaching a determination as to fairness, we did not consider the liquidation value of our
assets to be a material factor in our consideration of the fairness of the split transaction, because
we believe that the value that could be obtained through a liquidation of our assets would be
significantly less than the value that could be obtained through a cash-out, going-private
transaction. As a general rule, financial institutions do not have tangible assets that would bring
a high value in a liquidation sale, but instead have assets that are dependent on a strong customer
base. Because financial institutions are so heavily regulated, a liquidation process would be
lengthy, and it is likely that if the company announced a liquidation sale customers would move
their loans and deposits, which account for the most significant bank assets, to other
institutions. Therefore, liquidation of a financial institution such as Blackhawk would not be
likely to result in as high a value as if the company were to remain a going concern.
Because we have not repurchased shares of our common stock during the past two years,
we did not consider purchase prices paid in previous transactions in our consideration of the
fairness of the split transaction.
Neither we nor any of the members of our board of directors received any reports,
opinions or appraisals from any outside party relating to the split transaction or the fairness of the
consideration to be received by our shareholders, other than the fairness opinion and valuation
report received from Prairie Capital and attached as Appendix B-2 and Appendix C to this proxy
statement.
We have not made any provision in connection with the split transaction to grant
unaffiliated shareholders access to our corporate files or to obtain counsel or appraisal services at
our expense. With respect to unaffiliated shareholders’ access to our corporate files, our board
determined that this proxy statement, together with our other filings with the SEC, provide
adequate information for unaffiliated shareholders. With respect to obtaining counsel or
appraisal services solely for unaffiliated shareholders at our expense, the board did not consider
these actions necessary or customary. Our board also considered the fact that under Wisconsin
corporate law, and subject to certain conditions set forth under Wisconsin law, shareholders have
the right to review our relevant books and records of account.
Board Recommendation
Our board of directors believes the terms of the split transaction are fair and in the best
interests of our unaffiliated shareholders and unanimously recommends that you vote “FOR”
the proposal to adopt the amendments to our articles of incorporation that will allow us to effect
the split transaction.
The Bank’s Reasons and Purpose for the Split Transaction
The Bank is joining in the filing of this proxy statement solely because of its role in
providing, by dividend to the company, at the direction of the Company, its sole stockholder,
funds necessary to complete the split transaction. See “–Financing of the Split
Transaction.” The Bank is wholly-owned by Blackhawk, all of the directors of Blackhawk are
37
also directors of the Bank, and the management of Blackhawk also serves as management of the
Bank. As a result, the Bank’s reasons and purposes for engaging in the split transaction are the
same as those of Blackhawk. See “—Blackhawk’s Reasons for the Split Transaction” and “—
Purpose and Structure of the Split Transaction.”
The Bank’s Position as to the Fairness of the Split Transaction
The rules of the SEC require the Bank to express its belief as to the substantive and
procedural fairness of the split transaction to Blackhawk’s unaffiliated shareholders. The Bank’s
board of directors, all of whom also serve as directors of Blackhawk, believes that the split
transaction and the terms and provisions of the split transaction, including the cash to be paid to
Blackhawk’s non-continuing shareholders, are substantively and procedurally fair to
Blackhawk’s unaffiliated shareholders, including both unaffiliated shareholders that are
continuing shareholders and unaffiliated shareholders that are non-continuing shareholders. In
reaching this conclusion, the Bank’s directors relied upon the factors considered by and the
analyses and conclusions of the Blackhawk board of directors, as well as the analysis and
conclusions of Blackhawk’s financial advisor, Prairie Capital, and the Bank adopts such analyses
and conclusions as its own. See “—Blackhawk’s Position as to the Fairness of the Split
Transaction.” The Bank is not making any recommendation regarding how Blackhawk’s
shareholders should vote.
Mr. Bastian’s Reasons and Purpose for the Split Transaction
Mr. Bastian is joining in the filing of this proxy statement solely because under the SEC
rules he is an affiliate of the company, as its President and Chief Executive Officer. In addition,
Mr. Bastian is a member of the company’s board of directors. In his capacity as an officer and a
director of the company, Mr. Bastian has played a role in the company’s review and
consideration of the going private transaction and participated in the deliberations of the
company’s board of directors. See”—Background of the Split Transaction.” Mr. Bastian’s
reasons and purposes for engaging in the split transaction are the same as those of the
Company. See “—Blackhawk’s Reasons for the Split Transaction” and “—Purpose and
Structure of the Split Transaction.” He does not have any independent, personal reasons or
purposes for engaging in the transaction apart from those of the company.
Mr. Bastian’s Position as to the Fairness of the Split Transaction
The rules of the SEC require Mr. Bastian to express his belief as to the substantive and
procedural fairness of the split transaction to the company’s unaffiliated shareholders. Mr.
Bastian, who serves as the President and Chief Executive Officer and also as a director of the
company, believes that the split transaction and the terms and provisions of the split transaction,
including the cash to be paid to the Company’s non-continuing shareholders, are substantively
and procedurally fair to the Company’s unaffiliated shareholders, including both unaffiliated
shareholders that are continuing shareholders and unaffiliated shareholders that are noncontinuing shareholders. In reaching this conclusion, Mr. Bastian relied upon the same factors
considered by and the analyses and conclusions of the full board of directors, as well as the
analysis and conclusions of the company’s financial advisor, Prairie Capital, and Mr. Bastian
38
adopts such analyses and conclusions as its own. See “—Blackhawk’s Position as to the Fairness
of the Split Transaction.” As a member of the board of directors, Mr. Bastian recommends that
the Company’s shareholders vote to approve the split transaction.
39
Appendix B: Variable Definitions
Variable
Definition
ASSET GROWTHi,t-1
Percentage change in assets from t-3 to t-1.
α2 from the regression RETi,t = α0 + α1INDEXt +
α2SOXDATEt + ei,t, where RETi,t is the daily return for
firm i on date t from January 1, 2001 to December 31,
2003, INDEXt is the tercile of the NASDAQ bank index
for which the firm's market value of equity falls at date t,
and SOXDATEt is an indicator variable equal to 1 on
significant SOX announcement dates and 0 otherwise.
Indicator variable equal to 1 if the bank deregisters from
the SEC in year t.
Financing deficit defined as (DIVIDENDS +
ΔSECURITIES + ΔFIXEDASSETS + ΔLOANS ΔDEPOSITS +ΔCASH - CFO)/TOTAL ASSETS in t-1
Indicator variable equal to 1 if the number of
shareholders is greater than 1200 in t-1.
Indicator variable equal to 1 if the number of
shareholders is greater than 300 in t-1.
Shares held by a bank's largest institutional investor
divided by shares outstanding of the bank in t-1.
The number of institutional owners in year t-1 which
own at least five percent of the shares of a bank and
which have been owners for at least 5 years.
An indicator variable equal to 1 if the bank had loans to
insiders at any time during the previous three years.
The natural log of one plus the sum of the absolute value
of the value of shares bought and the value of shares
sold by the CEO divided by the dollar value of trading
volume in t-1.
Shares held by institutional investors divided by shares
outstanding in t-1.
Total loans in t divided by total assets at the beginning
of the period.
Indicator variable equal to 1 if the bank traded on the
NASDAQ, NYSE, or AMEX in t-1.
CARSOX
DEREGi,t
FINDEFi,t-1
GT1200i,t-1
GT300i,t-1
LARGEST INSTOWNi,t-1
CONSISTENT BLKHOLDERSi,t-1
INSIDERLOANi,t-1
INSIDERTRADi,t-1
INSTOWNi,t-1
LOANSi,t/TOTASSETSi,t-1
NASDAQi,t-1
NUMSHAREHOLDERSi,t
OTCBBi,t-1
PINKi,t-1
Number of shareholders of record in t.
Indicator variable equal to 1 if the bank traded on the
OTCBB in t-1.
Indicator variable equal to 1 if the bank traded in the
Pink Sheets in t-1.
40
TIER1CAPi,t-1
Indicator variable equal to 1 for periods after the bank
deregisters.
Stock market return in t-1.
Income before extraordinary items divided by lagged
total assets in t-1
Tier one capital in t-1
TOTASSETSi,t-1
Total assets in t-1
VOLi,t-1
Annual trading volume in t-1.
VOLi,t-1 ($)
Dollar value of annual trading volume in t-1
POSTi,t
RETi,t-1
ROAi,t-1
41
Figure 1
This figure is provided by SNL Financial and shows the number of bank deregistrations each
quarter from the first quarter of 2002 to the third quarter of 2012.
42
Figure 2
Panel A of this figure shows the yearly average of the number of shareholders of record for
deregistering and non-deregistering banks where year t represents the year of deregistration. The
timelines are presented for banks before and after the JOBS Act. Each deregistering bank is
matched to all non-deregistering banks with shareholders of record numbers that permit
deregistration in the deregistration year (year t). In particular, matching banks have between 0
(300) and 300 (1200) shareholders in year t for Pre-JOBS Act (Post-JOBS Act) deregistrations.
Panel B provides similar timelines for asset growth prior to the deregistration year. Asset growth
is the percentage change in assets from year t-3 to year t-1.
Panel A: Number of shareholders of record
# Shareholders - Pre JOBS Act
500.00
Number
400.00
300.00
200.00
100.00
0.00
t-4
t-3
t-2
Non Dereg
t-1
t
Dereg
Number
# Shareholders - JOBS Act
780.00
760.00
740.00
720.00
700.00
680.00
660.00
640.00
620.00
600.00
t-4
t-3
Non Dereg
t-2
t-1
Dereg
43
t
Figure 2 (Continued)
Panel B: Asset growth
Asset Growth - Pre JOBS Act
0.25
% Change
0.20
0.15
0.10
0.05
0.00
t-4
t-3
t-2
Non Dereg
t-1
t
Dereg
Asset Growth - JOBS Act
0.16
0.14
% Change
0.12
0.10
0.08
0.06
0.04
0.02
0.00
t-4
t-3
Non Dereg
t-2
t-1
Dereg
44
t
Table 1
Descriptive statistics.
This table reports the descriptive statistics for all variables used in the empirical analysis. Panel A (Panel B) provides the statistics
for deregistering and non-deregistering banks before (after) the JOBS Act. All variables are defined in Appendix B.
Panel A: Pre JOBS Act
Variable
N
Deregistering
Mean
Median Std. dev.
N
Non Deregistering
Mean
Median
Std. dev.
t-test
INSTOWNi,t-1
LARGEST INSTOWNi,t-1
CONSISTENT BLKHOLDERSi,t-1
INSIDERTRADi,t-1
INSIDERLOANi,t-1
TOTASSETSi,t-1
NUMSHAREHOLDERSi,t
GT300i,t-1
142
142
142
142
142
142
142
142
2.993
1.319
0.056
0.481
0.430
373.24
217.106
0.585
0.000
0.000
0.000
0.000
0.000
164.65
230.000
1.000
6.344
2.998
0.286
1.308
0.497
1,075.02
62.541
0.495
848
848
848
848
848
848
848
848
10.090
3.973
0.088
0.336
0.399
931.82
191.330
0.091
0.000
0.000
0.000
0.000
0.000
279.45
200.000
0.000
17.693
11.479
0.337
0.940
0.490
1,830.03
73.675
0.287
-8.78***
-5.62***
-1.56
1.32
0.70
-3.94***
4.42***
11.57***
ASSET GROWTHi,t-1
142
0.197
0.125
0.283
848
0.299
0.193
0.415
-2.09**
FINDEFi,t-1
ROAi,t-1
TIER1CAPi,t-1
VOLi,t-1
VOLi,t-1($)
RETi,t-1
142 -0.001
-0.004
142
0.004
0.006
142 15.753
13.640
142 185.21
67.70
142 2,381.70 1,039.12
122
0.006
0.002
0.062
0.012
8.493
13,370.11
286,499.01
0.387
-1.24
-0.74
0.43
-7.05***
-3.98***
-1.39
CARSOXi
NASDAQi,t-1
OTCBBi,t-1
PINKi,t-1
82
101
101
101
0.488
0.465
0.440
0.225
-0.36
-8.02***
7.36***
1.47
-0.210
0.287
0.614
0.099
-0.182
0.000
1.000
0.000
0.050
0.010
8.048
287.38
4,205.04
0.318
0.342
0.455
0.489
0.300
45
848
0.006
0.000
848
0.004
0.006
848
15.528
13.135
848 4,556.03
426.10
848 83,090.06 4,870.34
740
0.044
0.041
490
674
674
674
-0.229
0.684
0.263
0.053
-0.194
1.000
0.000
0.000
Table 1 (Continued)
Panel B: Post JOBS Act
Deregistering
Mean
Median Std. dev.
1.218
0.000
3.118
0.603
0.000
1.521
0.011
0.000
0.106
Variable
INSTOWNi,t-1
LARGEST INSTOWNi,t-1
CONSISTENT BLKHOLDERSi,t-1
N
89
89
89
INSIDERTRADi,t-1
INSIDERLOANi,t-1
TOTASSETSi,t-1
NUMSHAREHOLDERSi,t
GT1200i,t-1
ASSET GROWTHi,t-1
FINDEFi,t-1
89
89
89
89
89
89
89
0.736
0.865
415.27
699.899
0.022
0.091
-0.012
0.000
1.000
298.86
686.000
0.000
0.026
-0.012
1.461
0.343
414.49
201.988
0.149
0.278
0.033
230
230
230
230
230
230
230
ROAi,t-1
TIER1CAPi,t-1
VOLi,t-1
VOLi,t-1($)
RETi,t-1
CARSOXi
NASDAQi,t-1
89
89
89
89
70
32
72
0.000
14.117
156.40
897.50
-0.115
-0.106
0.097
0.003
13.550
36.10
239.74
-0.077
-0.086
0.000
0.012
4.346
374.77
1,953.15
0.312
0.273
0.298
230
0.003
0.006
230
14.694
13.475
230 4,312.98
659.35
230 49,461.34 5,313.95
216
-0.072
-0.050
149
-0.265
-0.182
221
0.706
1.000
OTCBBi,t-1
PINKi,t-1
72
72
0.556
0.347
1.000
0.000
0.500
0.479
46
N
230
230
230
Non Deregistering
Mean
Median
Std. dev.
20.424
12.205
21.400
4.610
4.058
4.752
0.413
0.000
0.840
221
221
0.610
0.704
1,236.35
658.300
0.039
0.074
-0.013
0.249
0.045
0.000
1.000
653.15
611.500
0.000
0.049
-0.012
0.000
0.000
t-test
-13.07***
-8.47***
-6.75***
1.074
0.457
2,025.36
240.562
0.194
0.228
0.040
0.78
3.40***
-4.89***
1.45
-0.82
0.75
-0.05
0.011
5.265
9,981.54
122,491.43
0.284
0.414
0.457
-1.88*
-1.04
-4.66***
-2.48**
-1.12
2.64**
-13.04***
0.433
0.208
5.02***
5.19***
Table 2
Correlations.
This table presents Pearson and Spearman correlations between variables used in the empirical analysis above and below the diagonal, respectively. Values are
bolded if significant at the 5 percent level or lower. Panel A (Panel B) provides the correlations for banks before (after) the JOBS Act. All variables are defined
in Appendix B.
Panel A: Pre JOBS Act
(I) DEREGi,t
(II) INSTOWNi,t-1
(III) LARGEST INSTOWNi,t-1
(IV) ln(CONSISTENT BLKHOLDERSi,t-1)
(V) INSIDERTRADi,t-1
(VI) INSIDERLOANi,t-1
(VII) ln(TOTASSETSi,t-1)
(VIII) GT300i,t-1
(IX) ASSET GROWTHi,t-1
(X) FINDEFi,t-1
(XI) ROAi,t-1
(XII) TIER1CAPi,t-1
(XIII) ln(VOLi,t-1)
(XIV) RETi,t-1
(XV) CARSOXi
I
1
-0.11
-0.10
-0.04
-0.02
0.02
-0.19
0.47
-0.09
-0.06
-0.02
0.03
-0.26
-0.02
0.02
II
-0.15
1
0.76
0.30
0.23
0.26
0.43
-0.03
-0.02
-0.05
0.00
0.07
0.55
-0.10
-0.07
III
-0.09
0.34
1
0.41
0.19
0.21
0.31
-0.07
-0.02
-0.05
-0.03
0.08
0.46
-0.09
-0.12
IV
-0.04
0.32
0.32
1
0.10
0.08
0.15
-0.07
-0.15
-0.11
-0.11
-0.03
0.15
-0.05
-0.09
V
0.05
0.08
0.05
0.06
1
0.05
0.16
0.04
0.06
0.04
-0.05
0.04
0.23
-0.05
-0.05
47
VI
0.02
0.29
0.10
0.08
0.04
1
0.26
0.10
0.16
0.03
0.17
-0.18
0.13
0.03
0.13
VII
-0.18
0.47
0.12
0.15
0.04
0.22
1
-0.02
0.11
0.02
0.24
-0.38
0.64
-0.06
-0.09
VIII
0.47
-0.11
-0.06
-0.06
0.07
0.10
-0.03
1
0.00
-0.03
0.06
-0.02
-0.11
-0.06
0.06
IX
-0.09
0.07
-0.02
-0.12
0.02
0.14
0.09
-0.01
1
0.40
0.29
-0.16
0.07
0.16
0.06
X
-0.04
0.03
-0.06
-0.12
0.07
0.01
-0.02
-0.02
0.32
1
0.19
0.02
0.05
0.05
0.01
XI
-0.01
0.03
-0.13
-0.15
-0.07
0.11
0.15
0.03
0.13
0.18
1
0.01
0.09
0.45
-0.04
XII
0.01
-0.04
-0.02
-0.06
0.05
-0.19
-0.33
-0.05
-0.06
0.07
0.06
1
-0.08
0.05
-0.05
XIII
-0.21
0.51
0.13
0.15
0.12
0.14
0.60
-0.09
0.02
0.03
0.02
-0.05
1
-0.04
-0.25
XIV
-0.04
-0.01
-0.09
-0.07
-0.06
0.04
-0.06
-0.05
0.17
0.07
0.46
0.05
-0.06
1
-0.06
XV
0.01
-0.19
-0.01
-0.07
-0.03
0.15
-0.05
0.05
0.06
-0.01
-0.02
-0.04
-0.24
-0.08
1
Table 2 (Continued)
Panel B: Post JOBS Act
(I) DEREGi,t
(II) INSTOWNi,t-1
(III) LARGEST INSTOWNi,t-1
(IV) ln(CONSISTENT BLKHOLDERSi,t-1)
(V) INSIDERTRADi,t-1
(VI) INSIDERLOANi,t-1
(VII) ln(TOTASSETSi,t-1)
(VIII) GT1200i,t-1
(IX) ASSET GROWTHi,t-1
(X) FINDEFi,t-1
(XI) ROAi,t-1
(XII) TIER1CAPi,t-1
(XIII) ln(VOLi,t-1)
(XIV) RETi,t-1
(XV) CARSOXi
I
1
-0.57
-0.47
-0.28
-0.07
0.17
-0.42
-0.04
-0.01
0.00
-0.14
-0.03
-0.59
-0.09
0.16
II
III
IV
-0.43
1
0.76
0.50
0.12
-0.22
0.64
0.03
0.05
-0.01
0.15
0.23
0.85
0.12
-0.34
-0.40
0.60
1
0.61
0.12
-0.13
0.49
0.03
0.00
-0.04
0.16
0.13
0.65
0.09
-0.22
-0.27
0.54
0.65
1
0.00
0.00
0.32
0.01
-0.06
-0.06
0.11
0.06
0.38
0.01
-0.16
V
0.05
-0.06
-0.03
-0.01
1
0.00
0.12
0.11
0.04
0.07
0.08
-0.03
0.19
0.05
0.07
48
VI
VII
0.17
-0.12
-0.09
-0.03
0.03
1
0.06
0.03
0.11
0.03
0.07
-0.28
-0.14
-0.20
0.07
-0.40
0.64
0.43
0.33
-0.04
0.07
1
0.02
0.13
0.08
0.28
0.03
0.68
0.10
-0.26
VIII
-0.04
0.02
0.01
0.05
0.07
0.03
0.01
1
-0.05
0.03
0.01
-0.01
0.00
0.05
0.02
IX
0.03
0.12
0.00
-0.03
0.01
0.11
0.08
-0.06
1
0.49
0.57
0.20
-0.03
0.32
0.00
X
0.00
0.07
0.01
-0.09
0.03
-0.04
0.08
0.04
0.44
1
0.38
0.18
-0.07
0.21
-0.01
XI
-0.11
0.14
0.05
0.04
0.01
-0.01
0.18
0.00
0.35
0.29
1
0.26
0.09
0.53
-0.05
XII
-0.05
0.24
0.10
0.03
-0.05
-0.31
0.03
-0.01
0.16
0.23
0.32
1
0.12
0.25
-0.04
XIII
-0.59
0.71
0.55
0.37
0.05
-0.14
0.62
-0.01
-0.07
-0.03
0.05
0.12
1
0.03
-0.32
XIV
-0.06
0.12
0.03
-0.01
0.06
-0.23
0.05
0.05
0.21
0.17
0.55
0.28
0.01
1
-0.06
XV
0.15
-0.34
-0.25
-0.18
0.09
0.02
-0.28
-0.01
-0.06
-0.08
-0.08
0.00
-0.30
-0.10
1
Table 3
Deregistration Determinants.
This table reports the results of testing the decision for banks to deregister. Panel A provides the estimation for banks prior to the JOBS Act and Panel B provides the estimation for banks after the
JOBS Act. We estimate logistic models with year fixed effects and cluster the standard errors at the firm level. Continuous variables are winsorized at the top and bottom 1% levels. ***, **, and *
denotes significance at the 1%, 5%, and 10% levels, respectively, using two-tailed tests. All variables are defined in Appendix B.
Panel A: Pre JOBS Act
AGENCYCOSTSi,t-1
ln(TOTASSETSi,t-1)
GT300i,t-1
ASSET GROWTHi,t-1
FINDEFi,t-1
ROAi,t-1
TIER1CAPi,t-1
ln(VOLi,t-1)
[1]
[2]
[3]
[4]
[5]
[6]
[7]
AGENCYCOSTSi,t-1 =
INSTOWNi,t-1
AGENCYCOSTSi,t-1 =
LARGEST
INSTOWNi,t-1
AGENCYCOSTSi,t-1 =
ln(CONSISTENT
BLKHOLDERSi,t-1)
AGENCYCOSTSi,t-1 =
INSIDERTRADi,t-1
AGENCYCOSTSi,t-1 =
INSIDERLOANi,t-1
AGENCYCOSTSi,t-1 =
INSTOWNi,t-1
AGENCYCOSTSi,t-1 =
INSTOWNi,t-1
-0.024**
-0.028
0.306
0.137
0.094
-0.034**
-0.015
(-2.025)
(-1.610)
(0.545)
(1.257)
(0.392)
(-2.401)
(-1.351)
-0.403**
-0.446**
-0.481**
-0.472**
-0.479**
-0.554**
-0.490
(-2.146)
(-2.355)
(-2.492)
(-2.477)
(-2.511)
(-2.351)
(-1.432)
3.010***
3.015***
3.035***
2.998***
3.011***
2.829***
3.223***
(12.052)
(12.265)
(12.309)
(12.287)
(12.276)
(10.542)
(8.158)
-1.032***
-1.039***
-1.015***
-1.024***
-1.036***
-1.162***
-0.666
(-2.640)
(-2.678)
(-2.641)
(-2.633)
(-2.689)
(-2.622)
(-1.063)
-1.486
-1.452
-1.085
-1.389
-1.172
1.295
-3.447
(-0.653)
(-0.641)
(-0.489)
(-0.641)
(-0.531)
(0.493)
(-1.021)
-4.367
-3.093
0.161
0.574
-0.793
-5.113
-12.351
(-0.379)
(-0.272)
(0.014)
(0.054)
(-0.072)
(-0.422)
(-0.646)
-0.002
-0.003
-0.003
-0.004
-0.003
-0.001
0.017
(-0.102)
(-0.163)
(-0.217)
(-0.263)
(-0.181)
(-0.043)
(0.783)
-0.122**
-0.131**
-0.143***
-0.147***
-0.141***
-0.081
-0.428***
(-2.386)
(-2.557)
(-2.767)
(-2.820)
(-2.733)
(-1.239)
(-3.192)
RETi,t-1
-0.511
(-1.220)
CARSOXi
-39.498
(-1.063)
INTERCEPT
Observations
Pseudo R-squared
2.752
3.272
3.692*
3.600*
3.646*
4.776*
5.288
(1.351)
(1.596)
(1.784)
(1.763)
(1.788)
(1.925)
(1.537)
990
990
990
990
990
862
572
0.316
0.313
0.311
0.313
0.311
0.302
0.397
49
Panel B: Post JOBS Act
AGENCYCOSTSi,t-1
ln(TOTASSETSi,t-1)
GT1200i,t-1
ASSET GROWTHi,t-1
FINDEFi,t-1
ROAi,t-1
TIER1CAPi,t-1
ln(VOLi,t-1)
[1]
[2]
[3]
[4]
[5]
[6]
[7]
AGENCYCOSTSi,t-1 =
INSTOWNi,t-1
AGENCYCOSTSi,t-1 =
LARGEST
INSTOWNi,t-1
AGENCYCOSTSi,t-1 =
ln(CONSISTENT
BLKHOLDERSi,t-1)
AGENCYCOSTSi,t-1 =
INSIDERTRADi,t-1
AGENCYCOSTSi,t-1
=INSIDERLOANi,t-1
AGENCYCOSTSi,t-1 =
INSTOWNi,t-1
AGENCYCOSTSi,t-1 =
INSTOWNi,t-1
-0.141***
-0.214***
-2.874**
0.312***
0.849*
-0.145***
-0.105**
(-3.288)
(-2.640)
(-2.206)
(2.773)
(1.956)
(-3.153)
(-2.284)
-0.415*
-0.503**
-0.571**
-0.652***
-0.661***
-0.341
-0.821*
(-1.742)
(-2.104)
(-2.402)
(-2.786)
(-2.784)
(-1.288)
(-1.716)
-0.791
-0.864
-1.045
-1.183
-1.220
0.362
1.149
(-0.488)
(-0.496)
(-0.598)
(-0.670)
(-0.654)
(0.348)
(1.237)
0.010
-0.092
-0.101
-0.342
-0.489
0.869
-1.745
(0.009)
(-0.088)
(-0.094)
(-0.365)
(-0.520)
(0.709)
(-0.804)
-1.988
-1.290
-2.003
-0.535
0.225
-0.442
0.508
(-0.349)
(-0.224)
(-0.352)
(-0.100)
(0.040)
(-0.061)
(0.076)
-25.879
-24.934
-23.288
-26.119
-25.147
-47.238*
-63.857**
(-1.267)
(-1.279)
(-1.170)
(-1.270)
(-1.273)
(-1.672)
(-2.207)
0.031
0.032
0.024
0.034
0.049
0.057
0.109
(0.887)
(0.959)
(0.743)
(1.021)
(1.329)
(1.206)
(1.422)
-0.473***
-0.510***
-0.585***
-0.676***
-0.612***
-0.615***
-0.670***
(-4.849)
(-5.028)
(-6.285)
(-6.876)
(-6.378)
(-4.132)
(-2.758)
RETi,t-1
0.110
(0.117)
CARSOXi
9.034
(0.111)
INTERCEPT
Observations
Pseudo R-squared
6.841**
8.081***
9.183***
10.188***
9.410***
6.328*
11.999**
(2.192)
(2.581)
(2.978)
(3.306)
(3.098)
(1.858)
(2.059)
319
319
319
319
319
286
181
0.398
0.387
0.383
0.379
0.374
0.393
0.390
50
Table 4
Stock Price Reaction to JOBS Act Announcement
This table reports the stock price reaction to two JOBS Act announcement dates for banks
eligible to deregister under the Act. The two dates are the passage of the Act in the House on
March 8, 2012 and the passage of the Act in the Senate on March 22, 2012. Panel A reports
cumulative abnormal returns for three overlapping event windows including [0,1], [0,2], and [5,5] where day 0 represents the two event dates. Returns are adjusted using a modified sizeadjusted bank index which includes all banks listed on the NASDAQ (excluding eligible-toderegister banks). For robustness, returns are also size-adjusted using the equally weighted
market portfolio. Test-statistics are based on Brown and Warner (1985). Panel B reports cross
sectional variation in CAR. The dependent variable is the modified NASDAQ bank index sizeadjusted cumulative abnormal return over the [0,1] window summed over the two event dates.
The model is estimated using OLS with standard errors clustered at the firm level. Continuous
variables are winsorized at the top and bottom 1% levels. ***, **, and * denotes significance at
the 1%, 5%, and 10% levels, respectively, using two-tailed tests. All variables are defined in
Appendix B.
Panel A: JOBS Act Announcement
Event
JOBS Act
Passage in the
House (March 8,
2012)
JOBS Act
Passage in the
Senate (March
22, 2012)
Window
[0,1]
[0,2]
N
323
323
MODIFIED
NASDAQ
BANK
INDEX SIZEADJUSTED
RETURN
-0.022
-0.018
[-5,5]
[0,1]
[0,2]
323
323
323
-0.038
0.007
0.002
-0.649
0.265
0.052
-0.001
-0.004
-0.006
-0.039
-0.325
-0.382
[-5,5]
323
0.010
0.182
0.007
0.251
51
t-stat
-0.882
-0.610
EQUAL
WEIGHTED
INDEX SIZEADJUSTED
RETURN
-0.014
-0.014
t-stat
-1.137
-0.938
Table 4 (Continued)
Panel B: Cross sectional variation in JOBS Act announcement CAR
AGENCYCOSTSi,t-1
ln(TOTASSETSi,t-1)
ASSET GROWTHi,t-1
FINDEFi,t-1
ROAi,t-1
TIER1CAPi,t-1
ln(VOLi,t-1)
PINKi,t-1
[1]
[2]
[3]
[4]
[5]
[6]
AGENCYCOSTSi,t-1 =
INSTOWNi,t-1
AGENCYCOSTSi,t-1 =
LARGEST
INSTOWNi,t-1
AGENCYCOSTSi,t-1 =
ln(CONSISTENT
BLKHOLDERSi,t-1)
AGENCYCOSTSi,t-1 =
INSIDERTRADi,t-1
AGENCYCOSTSi,t-1 =
INSIDERLOANi,t-1
AGENCYCOSTSi,t-1 =
INSTOWNi,t-1
0.002
0.087
2.252**
-0.111
-0.699
0.055**
(0.064)
(1.069)
(2.493)
(-0.375)
(-0.637)
(2.091)
1.020
0.970
0.915
1.016
1.117
0.513
(1.228)
(1.182)
(1.099)
(1.187)
(1.214)
(0.645)
7.348***
7.430***
7.506***
7.385***
7.574***
8.024*
(2.801)
(2.747)
(2.809)
(2.755)
(2.737)
(1.970)
-11.292
-11.308
-8.678
-11.116
-11.567
-9.105
(-0.828)
(-0.821)
(-0.639)
(-0.811)
(-0.834)
(-0.527)
5.551
5.467
1.650
5.587
5.736
-68.637
(0.072)
(0.070)
(0.021)
(0.072)
(0.074)
(-0.951)
0.093
0.092
0.095
0.091
0.074
0.195
(0.834)
(0.822)
(0.839)
(0.805)
(0.720)
(0.961)
0.419
0.347
0.308
0.430
0.395
0.161
(0.867)
(0.804)
(0.766)
(1.092)
(0.942)
(0.337)
-1.572
-1.502
-1.566
-1.550
-1.544
-1.579
(-0.733)
(-0.685)
(-0.730)
(-0.713)
(-0.710)
(-0.701)
CARSOXi
199.346*
(1.971)
INTERCEPT
Observations
Adjusted R-squared
-19.748*
-18.954*
-18.060*
-19.634*
-20.105*
-12.688
(-1.772)
(-1.766)
(-1.651)
(-1.721)
(-1.777)
(-1.145)
290
290
290
290
290
178
0.060
0.061
0.068
0.060
0.061
0.065
52
Table 5
Deregistration Announcement
This table reports the stock price reaction to banks’ deregistration announcements for
deregistrations before and after the JOBS Act. The deregistration announcement date is the
earliest of the filing of Form 15, the filing of Form 13E-3, and the public announcement of the
deregistration in the press. We report cumulative abnormal returns for three overlapping event
windows including [0,1], [0,2], and [-5,5] where day 0 represents the actual deregistration date.
Returns are adjusted using a modified size-adjusted bank index which includes all banks listed on
the NASDAQ (excluding eligible-to-deregister banks). For robustness, returns are also sizeadjusted using the equal weighted market portfolio. Test-statistics are based on Brown and
Warner (1985). Panel B (Panel C) reports cross sectional variation in CAR for pre-JOBS Act
(post-JOBS Act) deregistrations. The dependent variable is the modified NASDAQ bank index
size-adjusted cumulative abnormal return over the [0,1] window of the deregistration date. The
models are estimated using OLS with standard errors clustered at the firm level. Continuous
variables are winsorized at the top and bottom 1% levels. ***, **, and * denotes significance at
the 1%, 5%, and 10% levels, respectively, using two-tailed tests. All variables are defined in
Appendix B.
Panel A: Deregistration Announcement
Event
Deregistration
Announcement Pre JOBS Act
Deregistration
Announcement JOBS Act
Window
N
MODIFIED
NASDAQ
BANK
INDEX SIZEADJUSTED
RETURN
[0,1]
133
0.017
2.868***
0.014
2.588***
[0,2]
133
0.037
4.976***
0.033
4.804***
[-5,5]
133
0.035
2.442***
0.027
2.017***
[0,1]
71
-0.008
-0.582
-0.006
-0.480
[0,2]
71
-0.008
-0.446
-0.006
-0.360
[-5,5]
71
0.001
0.031
0.003
0.104
53
t-stat
EQUAL
WEIGHTED
INDEX SIZEADJUSTED
RETURN
t-stat
Table 5 (Continued)
Panel B: Cross sectional variation in pre JOBS Act deregistration announcement CAR
AGENCYCOSTSi,t-1
ln(TOTASSETSi,t-1)
ASSET GROWTHi,t-1
FINDEFi,t-1
ROAi,t-1
TIER1CAPi,t-1
ln(VOLi,t-1)
PINKi,t-1
[1]
[2]
[3]
[4]
[5]
[6]
AGENCYCOSTSi,t-1 =
INSTOWNi,t-1
AGENCYCOSTSi,t-1 =
LARGEST
INSTOWNi,t-1
AGENCYCOSTSi,t-1 =
ln(CONSISTENT
BLKHOLDERSi,t-1)
AGENCYCOSTSi,t-1 =
INSIDERTRADi,t-1
AGENCYCOSTSi,t-1 =
INSIDERLOANi,t-1
AGENCYCOSTSi,t-1 =
INSTOWNi,t-1
0.402
0.826
1.054
0.758
0.975
0.600
(1.207)
(1.187)
(0.170)
(1.162)
(0.417)
(1.568)
-6.513
-6.285
-5.823
-6.018
-6.059
-7.681
(-1.071)
(-1.057)
(-0.977)
(-1.004)
(-1.063)
(-1.281)
-3.912
-3.725
-3.218
-3.213
-3.635
-4.338
(-1.155)
(-1.151)
(-1.061)
(-1.039)
(-1.169)
(-0.998)
-3.256
-3.637
-8.442
-11.044
-7.547
1.570
(-0.359)
(-0.399)
(-0.960)
(-1.113)
(-0.815)
(0.123)
336.366**
322.478**
339.518**
358.274**
338.734*
611.746***
(2.115)
(2.125)
(2.046)
(2.061)
(1.950)
(2.753)
-0.227*
-0.226*
-0.213
-0.212
-0.210
-0.297*
(-1.679)
(-1.691)
(-1.576)
(-1.590)
(-1.520)
(-1.957)
-1.140
-1.176
-0.892
-0.858
-0.904
-1.843*
(-1.582)
(-1.602)
(-1.434)
(-1.377)
(-1.476)
(-1.672)
-1.663
-1.863
-1.910
-1.579
-2.172
5.806
(-0.592)
(-0.689)
(-0.729)
(-0.610)
(-0.804)
(0.938)
CARSOXi
-308.407
(-1.040)
INTERCEPT
Observations
Adjusted R-squared
84.847
82.185
76.040
77.760
78.705
100.200
(1.140)
(1.128)
(1.049)
(1.069)
(1.129)
(1.360)
211
211
211
211
211
130
0.182
0.178
0.148
0.155
0.149
0.304
54
Table 5 (Continued)
Panel C: Cross sectional variation in post JOBS Act deregistration announcement CAR
AGENCYCOSTSi,t-1
ln(TOTASSETSi,t-1)
ASSET GROWTHi,t-1
FINDEFi,t-1
ROAi,t-1
TIER1CAPi,t-1
ln(VOLi,t-1)
PINKi,t-1
[1]
[2]
[3]
[4]
[5]
[6]
AGENCYCOSTSi,t-1 =
INSTOWNi,t-1
AGENCYCOSTSi,t-1 =
LARGEST
INSTOWNi,t-1
AGENCYCOSTSi,t-1 =
ln(CONSISTENT
BLKHOLDERSi,t-1)
AGENCYCOSTSi,t-1 =
INSIDERTRADi,t-1
AGENCYCOSTSi,t-1
=INSIDERLOANi,t-1
AGENCYCOSTSi,t-1
=INSTOWNi,t-1
-0.932**
-1.204**
-8.340**
-0.017
-0.473
-0.869*
(-2.121)
(-2.571)
(-2.040)
(-0.030)
(-0.202)
(-1.820)
-0.399
-0.645
-0.781
-0.745
-0.756
1.804
(-0.448)
(-0.721)
(-0.854)
(-0.814)
(-0.849)
(1.362)
2.457
2.722
3.005
2.225
2.258
20.729**
(0.779)
(0.834)
(0.799)
(0.696)
(0.707)
(2.434)
-13.502
-18.389
-16.331
-11.728
-12.206
-85.261
(-0.590)
(-0.787)
(-0.629)
(-0.411)
(-0.508)
(-1.257)
17.073
32.701
46.449
44.562
46.417
-274.934*
(0.171)
(0.343)
(0.492)
(0.478)
(0.514)
(-1.720)
0.210
0.208
0.070
0.045
0.034
0.284
(0.785)
(0.882)
(0.285)
(0.189)
(0.136)
(0.999)
-0.117
-0.262
-0.504
-0.525
-0.545
-0.610
(-0.229)
(-0.457)
(-0.882)
(-0.874)
(-0.953)
(-0.521)
1.470
1.469
2.251**
2.351**
2.360**
-0.033
(1.268)
(1.365)
(2.076)
(2.071)
(2.107)
(-0.008)
CARSOXi
491.693
(0.781)
INTERCEPT
Observations
Adjusted R-squared
1.849
5.350
8.870
8.894
9.640
-26.147
(0.159)
(0.443)
(0.693)
(0.705)
(0.798)
(-1.507)
68
68
68
68
68
32
0.075
0.069
-0.006
-0.017
-0.017
0.221
55
Table 6
Post-deregistration Performance
This table reports results of post-deregistration accounting performance and lending activities
using quarterly data. The dependent variables include ROA and the natural log of net loans in
columns 1 and 2, respectively. Panel A provides the estimation for pre-Act deregistration sample
and Panel B provides the estimation for post-Act deregistration sample. The models are
estimated using OLS with quarter-year fixed effects and standard errors clustered at the firm
level. Continuous variables are winsorized at the top and bottom 1% levels. ***, **, and *
denotes significance at the 1%, 5%, and 10% levels, respectively, using two-tailed tests. All
variables are defined in Appendix B.
Panel A: Pre JOBS Act
[1]
[2]
LOANSi,t/TOTASSETSi,t-1
ROAi,t
DEREGi
-0.009
(-0.630)
0.000
(0.077)
POSTi,t
-0.016
(-1.400)
0.001***
(3.835)
ASSET GROWTHi,t-1
0.132**
(2.268)
0.001
(0.355)
ln(TOTASSETSi,t-1)
-0.028***
(-5.248)
0.001***
(5.447)
TIER1CAPi,t-1
-0.006***
(-8.009)
13.068***
(90.308)
-0.000
(-0.779)
0.741***
(44.915)
7,609
0.171
7,596
0.153
INTERCEPT
Observations
Adjusted R-squared
56
Table 6 (Continued)
Panel B: Post JOBS Act
[1]
[2]
LOANSi,t/TOTASSETSi,t-1
ROAi,t
DEREGi
-0.024
(-1.638)
-0.000
(-1.201)
POST i,t
-0.016
(-1.245)
-0.000
(-0.257)
ASSET GROWTHi,t-1
0.103
(1.337)
0.007***
(3.060)
ln(TOTASSETSi,t-1)
-0.026***
(-3.795)
0.000**
(2.081)
TIER1CAPi,t-1
-0.007***
(-5.703)
1.167***
(12.350)
0.000***
(2.683)
-0.005***
(-2.654)
4,676
0.145
4,679
0.068
INTERCEPT
Observations
Adjusted R-squared
57