Underwriting Fees and Shareholder Rights

28 Pages Posted: 18 Dec 2013

See all articles by Ji‐Chai Lin

Ji‐Chai Lin

Louisiana State University, Baton Rouge

Bahar Ulupinar

West Chester University of Pennsylvania

Multiple version iconThere are 2 versions of this paper

Date Written: November/December 2013


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 strongly 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, 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

Suggested Citation

Lin, Ji‐Chai and Ulupinar, Bahar, Underwriting Fees and Shareholder Rights (November/December 2013). Journal of Business Finance & Accounting, Vol. 40, Issue 9-10, pp. 1276-1303, 2013, Available at SSRN: https://ssrn.com/abstract=2369085 or http://dx.doi.org/10.1111/jbfa.12026

Ji‐Chai Lin (Contact Author)

Louisiana State University, Baton Rouge

Baton Rouge, LA 70803
United States

Bahar Ulupinar

West Chester University of Pennsylvania ( email )

West Chester, PA 19383
United States

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