Underwriter Certification, Issuer-Underwriter Matching, and SEO Performance

50 Pages Posted: 17 Aug 2019 Last revised: 8 Jan 2020

See all articles by Charles W. Calomiris

Charles W. Calomiris

Columbia University - Columbia Business School; National Bureau of Economic Research (NBER)

Yehuda (Yud) Izhakian

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Jaime F. Zender

University of Colorado at Boulder - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: August 13, 2019

Abstract

The introduction of deal types for issues of seasoned equity in which the offer follows quickly after the announcement highlights the role of underwriter certification in the performance of SEOs. Controlling for the matching between underwriters and issuing firms, we find that the quality of the underwriter has a positive relation to the market's response to the announcement of these accelerated SEOs. For the accelerated and bought deals, the discount of the offer price from the closing price the day before the offering (which represents a cost to the issuing firm) is significantly negatively related to underwriter quality. For fully marketed deals, however, these relationships are not significant. Issuing firms pay for the value provided by higher quality underwriters in the form of higher total fees.

Keywords: Season equity offer, Asymmetric information, One to many matching, Underwriter reputation, Control function approach

JEL Classification: D82, G32, G14

Suggested Citation

Calomiris, Charles W. and Izhakian, Yehuda (Yud) and Zender, Jaime F., Underwriter Certification, Issuer-Underwriter Matching, and SEO Performance (August 13, 2019). Baruch College Zicklin School of Business Research Paper No. 2019-08-05; Columbia Business School Research Paper Forthcoming. Available at SSRN: https://ssrn.com/abstract=3437007 or http://dx.doi.org/10.2139/ssrn.3437007

Charles W. Calomiris

Columbia University - Columbia Business School ( email )

3022 Broadway
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United States
212-854-8748 (Phone)
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National Bureau of Economic Research (NBER)

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Yehuda (Yud) Izhakian (Contact Author)

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

17 Lexington Avenue
New York, NY 10010
United States

HOME PAGE: http://people.stern.nyu.edu/yizhakia/

Jaime F. Zender

University of Colorado at Boulder - Department of Finance ( email )

Boulder, CO 80309
United States
303-554-1665 (Phone)
303-492-4689 (Fax)

HOME PAGE: http://www-bus.colorado.edu/faculty/Zender/

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