Investment Banker Directors and Capital Raising Costs

59 Pages Posted: 4 Sep 2017 Last revised: 15 Jun 2019

See all articles by Qianqian Huang

Qianqian Huang

City University of Hong Kong

Kai Li

University of British Columbia (UBC) - Sauder School of Business; China Academy of Financial Research (CAFR)

Ting Xu

University of Virginia - Darden School of Business

Date Written: June 12, 2019

Abstract

Much of the literature on corporate boards is centered on their monitoring role, yet boards spend a significant portion of their time advising management. Using a large hand-collected data set of investment bankers (IB) on boards, we examine whether and how IB directors affect capital raising costs. We show that seasoned equity issuers with IB directors are associated with higher announcement returns and lower issuance costs, whereas we do not find such association for debt issuance. We further show that the presence of IB directors reduces issuers’ reliance on top underwriters. Additional analyses suggest that IB directors help improve firms’ information environment. Our results highlight the advising role of specialist directors in transactions traditionally dominated by financial intermediaries.

Keywords: Board of directors; advising; investment banker directors; information environment; seasoned equity offerings; cost of capital

JEL Classification: G14, G24, G32

Suggested Citation

Huang, Qianqian and Li, Kai and Xu, Ting, Investment Banker Directors and Capital Raising Costs (June 12, 2019). Available at SSRN: https://ssrn.com/abstract=3031652 or http://dx.doi.org/10.2139/ssrn.3031652

Qianqian Huang (Contact Author)

City University of Hong Kong ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
852-3442-0284 (Fax)

Kai Li

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8353 (Phone)
604-822-4695 (Fax)

HOME PAGE: http://finance.sauder.ubc.ca/~kaili

China Academy of Financial Research (CAFR)

1954 Huashan Road
Shanghai P.R.China, 200030
China

Ting Xu

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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