Underwriting Fees and Shareholder Rights

Journal of Business Finance and Accounting, Forthcoming

Posted: 17 Feb 2013

See all articles by Bahar Ulupinar

Bahar Ulupinar

West Chester University of Pennsylvania

Ji-Chai Lin

Hong Kong PolyU

Multiple version iconThere are 2 versions of this paper

Date Written: February 16, 2013

Abstract

Do firms’ governance provisions affect their terms of obtaining external financing? We hypothesize that it is more difficult for firms with more restrictions on shareholder rights to raise external equity, and that since analyst coverage is an important part of underwriting services, underwriters would use analyst recommendations to promote issuing firms with weaker shareholder rights more and charge them higher underwriting fees. Consistent with our hypothesis, we find that analyst recommendations on issuing firms with weak shareholder rights increase more than those with strong shareholder rights prior to SEOs, and that underwriting spreads are positively related to issuing firms’ shareholder rights as proxied by the G-index. Furthermore, consistent with Bebchuk et al. (2009), the effect of shareholder rights on underwriting fees is largely contained in the six provisions in the E-index.

Keywords: Shareholder Rights, Analyst Coverage, SEOs, Gross Spreads

JEL Classification: G32, G24

Suggested Citation

Ulupinar, Bahar and Lin, Ji-Chai, Underwriting Fees and Shareholder Rights (February 16, 2013). Journal of Business Finance and Accounting, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2219329

Bahar Ulupinar (Contact Author)

West Chester University of Pennsylvania ( email )

West Chester, PA 19383
United States

Ji-Chai Lin

Hong Kong PolyU ( email )

M715, Li Ka Shing Tower
Hung Hom, Kowloon
China

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