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AN EMPIRICAL INVESTIGATION OF SCORs (SMALL CORPORATE OFFERING REGISTRATION): DO GEOGRAPHICAL REGION AND AMOUNT OFFERED AFFECT THE SUCCESS OF OFFERINGS?
Jerome S. Osteryoung
James C. Brau
John R. Kerr
College of Business
Florida State University
Tallahassee, FL 32306-1042
The Small Corporate Offering Registration ideology is discussed with a brief history of SCOR evolution. The actual SCOR form (Form U-7) is discussed in a narrative manner. The general descriptive statistics are presented for 119 separate SCOR offerings. The data is then examined to determine if the region or amount offered affected the success of the offerings.
Using the data provided by Tom Stewart-Gordon, 119 separate SCOR offers are examined. Companies that either broke escrow or raised 100% of equity registered are considered successful. Both a Multinomial Logit Model and a Binomial Probit Model are used, defining the dependent variable as: Success/failure and the independent variables as: West Region, Midwest Region, Northeast Region, Southeast Region, and amount of equity registered. The models are used to determine if either the geographical region and/or the amount of equity registered have a significant impact on success or failure.
Straight OLS testing on all of the independent variables indicated that each of them were insignificant when alone. The Logit Model indicated that none of the independent variables are significant. The lowest p-value in the Logit model was 0.21. This conclusion was confirmed with the Probit Model which returned the lowest p-value of 0.25.
Firms desiring to issue stock through the Small Corporate Offerings Registration system will have an equal chance of success in whatever region they may choose to register. Also, the amount of equity they register has an insignificant impact on the success of their offering. These results may prove important to small firms who are deciding what regions to register SCORs in. The transactions-costs of registering SCORs varies between regions. Our testing indicates that seeking the low-cost offering, regardless of the region, will be the most efficient choice. Also, firms should request the actual amount of capital needed (up to the $1 million maximum) and not try to select a "magic number" that they feel may appear more attractive to investors.