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Seasoned Equity Offers: The Effect of Insider Ownership and FloatVincent IntintoliSouthern Illinois University at Carbondale Kathleen M. KahleUniversity of Arizona - Department of Finance March 17, 2010 Financial Management, Forthcoming Abstract: SEO underpricing has increased dramatically since the early 1980s. While previous research has examined the determinants of SEO underpricing, these studies have not explored the effect of insider ownership on discounts. We find that this effect is twofold. First, higher insider ownership reduces float, thereby increasing price pressure and SEO underpricing; this effect is greatest in firms with low liquidity. Second, the greater the percentage of secondary shares offered, the lower the underpricing, suggesting that managers pressure banks to reduce underpricing when their personal wealth is at stake. However, we find that this negative relation is mitigated if the firm employs a prestigious underwriter.
Number of Pages in PDF File: 44 Keywords: seasoned equity offerings, follow-on offerings, underpricing, float, marketing of securities, ownership JEL Classification: G14, G24, G32 Accepted Paper SeriesDate posted: March 10, 2009 ; Last revised: August 24, 2011Suggested CitationContact Information
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