Underwriter Reputation, Issuer-Underwriter Matching, and SEO Performance
Journal of Financial and Quantitative Analysis
68 Pages Posted: 17 Aug 2019 Last revised: 8 Mar 2021
Date Written: August 13, 2019
The role of underwriters is altered in new seasoned equity offering deal types in which the offering follows quickly after its announcement. Controlling for the endogenous matching between issuing firms and underwriters, we find increased underwriter reputation mitigates the immediate price impact of announcing an accelerated bookbuilt offering, exacerbates the price impact of announcing a bought offering, and has no immediate price impact for fully marketed deals. Underwriter reputation positively affects price outcomes for fully marketed deals around the offer date. Matching with a more reputable underwriter to achieve improved pricing generates higher total fees but a lower fee-to-proceeds ratio. Reputation effects are not apparent in the absence of controlling for the endogenous matching.
Keywords: Season equity offer, Asymmetric information, One to many matching, Underwriter reputation, Control function approach
JEL Classification: D82, G32, G14
Suggested Citation: Suggested Citation