Managing the Costs of Issuing Common Equity: The Role of Registration Choice

Abstract

We examine how firms can manage the costs of issuing common equity through their choice of SEC registration strategy. Firms that use unallocated shelf, a deregulated registration procedure, pay lower underwriter fees and access the market faster than similar firms that use the slower traditional procedure that requires detailed advance disclosure. Low information-asymmetry firms that use shelf incur minimal asymmetric-information related price declines when registering and issuing equity. High information-asymmetry firms that choose shelf, however, experience large price declines, and instead tend to choose the traditional registration procedure.

Keywords: Shelf registration, seo, asymmetric information

JEL Classification: G30, G32, G38