The Role of Underwriters in Nontraditional Offerings: Empirical Evidence
35 Pages Posted: 25 Jan 2005
Date Written: April 2005
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: Suggested Citation