Are There Economies of Scale in Underwriting Fees? Evidence of Rising External Financing Costs

2000 ◽  
Vol 13 (1) ◽  
pp. 191-218 ◽  
Author(s):  
Oya Altınkılıç ◽  
Robert S. Hansen
Keyword(s):  
Economies Of Scale ◽  
External Financing ◽  
Financing Costs ◽  
Underwriting Fees

The direct costs of raising external equity capital for US REIT IPOs

2012 ◽  
Vol 30 (6) ◽  
pp. 538-562
Author(s):  
Ranajit Kumar Bairagi ◽  
William Dimovski
Keyword(s):  
Initial Public Offerings ◽  
Economies Of Scale ◽  
Weighted Average ◽  
Direct Costs ◽  
Equity Capital ◽  
Return Volatility ◽  
Critical Determinant ◽  
Content Type ◽  
Underwriting Fees ◽  
External Equity

PurposeThe purpose of this paper is to investigate the total direct costs of raising external equity capital for US real estate investment trust (REIT) initial public offerings (IPOs).Design/methodology/approachThe study provides recent evidence on total direct costs for a comprehensive dataset of 125 US REIT IPOs from 1996 until June 2010. A multivariate OLS regression is performed to determine significant factors influencing the level of total direct costs and also underwriting fees and non‐underwriting direct expenses.FindingsThe study finds economies of scale in total direct costs, underwriting fees and non‐underwriting expenses. The equally (value) weighted average total direct costs are 8.33 percent (7.52 percent), consisting of 6.49 percent (6.30 percent) underwriting fees and 1.87 percent (1.22 percent) non‐underwriting direct expenses. The study finds a declining trend of total direct costs for post 2000 IPOs which is attributed to the declining trend in both underwriting fees and non‐underwriting direct expenses. Offer size is a critical determinant for both total direct costs and their individual components and inversely affects these costs. The total direct costs are found significantly higher for equity REITs than for mortgage REITs and are also significantly higher for offers listed in New York Stock Exchange (NYSE). Underwriting fees appear to be negatively influenced by the offer price, the number of representative underwriters involved in the issue, industry return volatility and the number of potential specific risk factors but positively influenced by prior quarter industry dividend yield and ownership limit identified in the prospectus. After controlling for time trend, the paper finds REIT IPOs incur higher non‐underwriting direct expenses in response to higher industry return volatility prior to the offer.Originality/valueThis paper adds to the international REIT IPO literature by exploring a number of new influencing factors behind total direct costs, underwriting fees and non‐underwriting direct expenses. The study includes data during the recent GFC period.

scholarly journals Labor and Capital Dynamics under Financing Frictions*

2018 ◽  
Vol 23 (2) ◽  
pp. 279-323 ◽  
Author(s):  
Ryan Michaels ◽  
T Beau Page ◽  
Toni M Whited
Keyword(s):  
Wage Bargaining ◽  
Reduced Form ◽  
Probability Of Default ◽  
External Financing ◽  
Financing Costs ◽  
Financing Frictions ◽  
Investment And Financing ◽  
Unemployment Risk

Abstract We assemble a new, quarterly panel dataset that links firms’ investment and financing to their employment and wages. In the data, wages and leverage are negatively related, both cross-sectionally and within firms. This pattern contradicts models in which firms insure workers against unemployment risk. We reconcile this fact with a model that integrates factor adjustment frictions and wage bargaining with costly external financing. In the model, the probability of default rises with debt. Because default incurs deadweight costs, the expected surplus over which firms and workers bargain falls, thus depressing wages. We show that raising financing costs reduces employment and wages, in line with recent reduced-form evidence.

Does Political Uncertainty Increase External Financing Costs? Measuring the Electoral Premium in Syndicated Lending

2018 ◽  
Vol 54 (5) ◽  
pp. 2141-2178 ◽  
Author(s):  
Olivia S. Kim
Keyword(s):  
Developed Countries ◽  
Syndicated Loans ◽  
External Financing ◽  
Political Uncertainty ◽  
Large Sample ◽  
Financing Costs ◽  
Electoral Uncertainty ◽  
The Impact

This article investigates the impact of political uncertainty on contractual lending terms using a large sample of syndicated loans and a within-firm estimation approach to achieve identification. Firms pay 7 basis points (bps) more on loans originated when their lenders are undergoing an election relative to when their lenders are not undergoing an election. Lenders from less financially developed countries are more likely to pass political uncertainty costs to borrowers. Consistent with electoral uncertainty driving this premium, the most contested elections have the largest impact (17 bps). Overall, political uncertainty leads to a tangible increase in firms’ financing costs.

scholarly journals COMPETITIVE ADVANTAGE FROM OPERATIONAL CORPORATE REAL ESTATE DISPOSALS

2004 ◽  
Vol 8 (1) ◽  
pp. 11-24 ◽  
Author(s):  
Antti Louko
Keyword(s):  
Real Estate ◽  
Capital Structure ◽  
Large Scale ◽  
Economies Of Scale ◽  
Balance Sheet ◽  
External Financing ◽  
Corporate Real Estate ◽  
Internal Property ◽  
Knowledge Economies ◽  
Accounting Rules

The large‐scale operational corporate real estate disposals, which have lately become more and more common in Europe, can create many benefits to corporations. Firstly, the corporations can get an immediate capital injection without additional external financing to support growth or to better capital structure. Secondly, corporations can in the best case obtain more property industry knowledge, economies of scale, tax advantages and increased flexibility through property disposals. However, it is also important to notice that sometimes the best expert is an internal property manager and that large corporate real estate deals can be slow and costly to structure. Furthermore, if the outsourcing is not planned well, agency problems and inflexibility could arise. In addition, off‐balance sheet financing is becoming more difficult due to changes in accounting rules. In all, it is crucial to have a solid property strategy that supports the overall business goal before structuring large‐scale disposals.

External Financing and Customer Capital: A Financial Theory of Markups

2020 ◽  
Author(s):  
Winston Wei Dou ◽  
Yan Ji
Keyword(s):  
Continuous Time ◽  
Monopolistic Competition ◽  
External Financing ◽  
Financial Policies ◽  
Marginal Value ◽  
Corporate Liquidity ◽  
Customer Base ◽  
Financing Costs ◽  
Customer Capital ◽  
Industry Equilibrium

We develop a continuous-time industry equilibrium model of monopolistic competition to understand how product markups are determined in the presence of external financing costs and customer capital. Firms optimally set markups to balance the tradeoff between profiting from their existing customer base and developing their future customer base. We characterize how the equilibrium markups are determined by the interaction between the marginal value of corporate liquidity and the marginal value of customer base. Firms’ markups are more responsive to changes in their marginal value of corporate liquidity when the marginal value of customer base is higher. Moreover, the model predicts that greater product market threats lead to more conservative financial policies, which is supported by the data. This paper was accepted by Gustavo Manso, finance.

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