Do the Equity Holding and Soundness of Bank Underwriters Affect Issue Costs of SEOs?
Posted: 4 Jun 2012
Date Written: October 21, 2009
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: Suggested Citation