The Role of Underwriters in Nontraditional Offerings: Empirical Evidence

35 Pages Posted: 25 Jan 2005

See all articles by Anita Anand

Anita Anand

University of Toronto - Faculty of Law

Lewis D. Johnson

Queen's University - Smith School of Business

Date Written: April 2005

Abstract

This study fills a gap in the academic literature by examining the willingness of firms to utilize the Internet to conduct a securities offering without an underwriter, thereby replacing the traditional book-built offering. Through both qualitative and quantitative data collection, we find that although underwriters are costly because of their rent, firms believe that the services and other benefits that underwriters provide, in particular with respect to marketing and distribution, outweigh these costs. In addition, we find that investors value the verification function provided by underwriters. Furthermore, lack of familiarity with the DPO process is a barrier to undertaking and participating in these transactions for both issuers and investors. Thus, despite the apparent cost savings of raising capital over the Internet, few firms are likely to undertake this means of capital finance.

Keywords: Offerings, securities, underwriter, public

JEL Classification: G24, G30, G32

Suggested Citation

Anand, Anita and Johnson, Lewis D., The Role of Underwriters in Nontraditional Offerings: Empirical Evidence (April 2005). Queen's Univ. Law & Economics Paper No. 2005-05. Available at SSRN: https://ssrn.com/abstract=653863 or http://dx.doi.org/10.2139/ssrn.653863

Anita Anand (Contact Author)

University of Toronto - Faculty of Law ( email )

78 Queen's Park
Toronto, Ontario M5S 2C5
Canada
4169464002 (Phone)

Lewis D. Johnson

Queen's University - Smith School of Business ( email )

Smith School of Business - Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

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