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Seasoned Equity Offers: The Effect of Insider Ownership and Float

Vincent Intintoli
Southern Illinois University at Carbondale

Kathleen M. Kahle
University of Arizona - Department of Finance


January 8, 2010


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.

Keywords: seasoned equity offerings, follow-on offerings, underpricing, float, marketing of securities, ownership

JEL Classifications: G14, G24, G32

Working Paper Series

Date posted: March 10, 2009 ; Last revised: January 25, 2010

Suggested Citation

Intintoli, Vincent and Kahle, Kathleen M., Seasoned Equity Offers: The Effect of Insider Ownership and Float (January 8, 2010). Available at SSRN: http://ssrn.com/abstract=1352665


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Contact Information

Kathleen M. Kahle (Contact Author)
University of Arizona - Department of Finance ( email )
McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States
520-621-7489 (Phone)
Vincent Intintoli
Southern Illinois University at Carbondale ( email )
Mail Code 4626
Carbondale, IL 62901-4626
United States
618-453-1420 (Phone)
618-453-5626 (Fax)
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