Underwriter Relationships and Shelf Offerings

68 Pages Posted: 15 Mar 2011 Last revised: 8 Jan 2018

See all articles by Mark Humphery-Jenner

Mark Humphery-Jenner

UNSW Business School; Financial Research Network (FIRN)

Sigitas Karpavicius

The University of Adelaide

Jo-Ann Suchard

UNSW Business School; Financial Research Network (FIRN)

Date Written: 2017

Abstract

We compare the motivations for switching underwriters between seasoned equity offerings (SEOs) for both shelf offerings and traditional offerings. Shelf offerings have risen in importance and accounted for more than 90% of SEOs in 2015. In traditional offerings, the underwriter is selected before the terms and pricing of the deal are set. In contrast, shelf issuers request proposals or bids from underwriters for the sale of securities and the underwriter is selected based on the pricing, terms and services offered in the bid. The competitive and transactional nature of the shelf registered market may reduce switching costs for the issuer and potentially increases the issuer’s bargaining power. This suggests that underwriter switching in shelf offerings might have different, heretofore unexplored, drivers from traditional offerings. The results suggest that cost-considerations motivate switching in shelf offerings whereas underwriter reputation motivates switching in traditional offerings. However, changes in underwriter reputation can themselves be associated with changes in cost. Cost considerations also impact switching from traditional offerings to shelf offerings.

Keywords: Underwriter services, Firm loyalty, Reputation, Seasoned equity offerings, Issue costs

JEL Classification: G24, L14

Suggested Citation

Humphery-Jenner, Mark and Karpavicius, Sigitas and Suchard, Jo-Ann, Underwriter Relationships and Shelf Offerings (2017). Journal of Corporate Finance, Forthcoming, 27th Australasian Finance and Banking Conference 2014 Paper, Available at SSRN: https://ssrn.com/abstract=1786038 or http://dx.doi.org/10.2139/ssrn.1786038

Mark Humphery-Jenner

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Sigitas Karpavicius

The University of Adelaide ( email )

Adelaide Business School
Level 12, 10 Pulteney Street
Adelaide, SA 5005
Australia
+61 8 8313 8007 (Phone)

Jo-Ann Suchard (Contact Author)

UNSW Business School ( email )

high street
High St
sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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