Do the Equity Holding and Soundness of Bank Underwriters Affect Issue Costs of SEOs?

Posted: 4 Jun 2012

See all articles by Katsushi Suzuki

Katsushi Suzuki

Hitotsubashi University - Graduate School of International Corporate Strategy

Date Written: October 21, 2009

Abstract

This paper examines the effects of characteristics of bank underwriters on issue costs in seasoned equity offerings in Japan following deregulation in 1999. I find that banks’ holding loans have a negative effect on price discounts and no effect on underwriting fees. However, banks’ equity holdings have no effect on discount rates and a positive effect on underwriting fees. Furthermore, issuers with unhealthy banks pay higher discount rates, are more likely to be weak in their ex-post operating performance, and are less willing to switch underwriters. I conclude that the characteristics of banks have different effects on issue costs.

Keywords: Commercial bank, Issue cost, Certiication, Conflicts of interest, Bargaining power

JEL Classification: G21, G24

Suggested Citation

Suzuki, Katsushi, Do the Equity Holding and Soundness of Bank Underwriters Affect Issue Costs of SEOs? (October 21, 2009). Journal of Banking and Finance, Vol. 34, 2010, Available at SSRN: https://ssrn.com/abstract=2075478

Katsushi Suzuki (Contact Author)

Hitotsubashi University - Graduate School of International Corporate Strategy ( email )

2-1-2 Hitotsubashi
Chiyoda-ku,
Tokyo, 101-8439
Japan

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