Cross‐Country Variability in Cost of Raising Equity: Evidence from Seasoned Equity Offerings

30 Pages Posted: 26 May 2020

See all articles by Manu Gupta

Manu Gupta

Virginia Commonwealth University (VCU) - Department of Finance, Insurance & Real Estate

Puneet Prakash

Missouri State University

Nanda K. Rangan

Virginia Commonwealth University

Date Written: December 2019

Abstract

We examine how county‐level governance affects the cost of raising equity. Using data on seasoned equity offerings, we find that the underwriting spread is determined by the litigation risk of issue certifiers, and offer underpricing is largely determined by the investment risk of the equity issue. Underwriting spread increases with enhanced legal enforcement, offsetting the reduction in underpricing associated with strong legal enforcement. Our study offers insight into the effect of legal enforcement and regulatory policy on the cost of raising equity.

Suggested Citation

Gupta, Manu and Prakash, Puneet and Rangan, Nanda K., Cross‐Country Variability in Cost of Raising Equity: Evidence from Seasoned Equity Offerings (December 2019). International Review of Finance, Vol. 19, Issue 4, pp. 821-850, 2019, Available at SSRN: https://ssrn.com/abstract=3603502 or http://dx.doi.org/10.1111/irfi.12201

Manu Gupta (Contact Author)

Virginia Commonwealth University (VCU) - Department of Finance, Insurance & Real Estate ( email )

Richmond, VA 23284
United States

Puneet Prakash

Missouri State University ( email )

United States
65897 (Fax)

Nanda K. Rangan

Virginia Commonwealth University ( email )

2400 East Cary Street, Suite # 400
Richmond, VA 23223
United States
8048277410 (Phone)

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