Discussion of "Analyst Coverage and the Cost of Raising Equity Capital: Evidence from Underpricing of Seasoned Equity Offerings"

2008 ◽  
Vol 25 (3) ◽  
pp. 701-706
Author(s):  
Mark H. Lang
Keyword(s):  
Seasoned Equity Offerings ◽  
Equity Capital ◽  
Equity Offerings ◽  
Analyst Coverage ◽  
The Cost

The Role of Internal Control in the Equity Issue Market: Evidence From Seasoned Equity Offerings

2015 ◽  
Vol 32 (3) ◽  
pp. 303-328 ◽  
Author(s):  
Xinghua Gao ◽  
Yonghong Jia
Keyword(s):  
Internal Control ◽  
Risk Premium ◽  
Dominant Role ◽  
Seasoned Equity Offerings ◽  
Equity Capital ◽  
Equity Offerings ◽  
Equity Issue ◽  
Sarbanes Oxley ◽  
The Cost

This article examines the role of internal control requirements under the Sarbanes–Oxley (SOX) Act of 2002 in firms’ cost of raising equity capital. We find that, prior to the disclosure of internal control weaknesses (ICWs), ICWs are not directly associated with underwriters’ gross spread and seasoned equity offering (SEO) underpricing. After the disclosure, however, underwriters charge a risk premium on ICW issuers, especially on those disclosing ICWs in multiple consecutive years. We also find that SEO underpricing is exacerbated by multiple-year-disclosed ICWs but not by first-timers. More notably, we find that managers play a dominant role in deciding issue size pre-disclosure, but this dominance weakens post-disclosure. Taken together, our evidence suggests that internal controls help moderate the cost of raising equity capital and that ICW disclosures have significant implications for underwriters in the equity issue market.

scholarly journals The Effect of Analyst Coverage on the Relationship between Seasoned Equity Offerings and Investment Efficiency From Korea

2018 ◽  
Vol 10 (8) ◽  
pp. 2704 ◽  
Author(s):  
Hyun Oh ◽  
Woo Kim
Keyword(s):  
Earnings Management ◽  
Significant Negative Correlation ◽  
Seasoned Equity Offerings ◽  
Investment Efficiency ◽  
Allocation Of Resources ◽  
Equity Offerings ◽  
Efficient Operation ◽  
Analyst Coverage ◽  
External Auditor ◽  
The Relationship

In order for a firm to remain sustainable, it must establish a strategy that is appropriate to its changing environment. One of these strategies is that the procurement of capital and the efficient operation of the procured capital are directly linked to the sustainability of the firm. This study empirically analyzes the relationship between seasoned equity offerings (hereafter SEO) and investment efficiency. We examine the investment efficiency of firms that have SEO and those that do not, and then analyze the effect of analysts on the relationship between SEO and investment efficiency. The empirical results of this study are as follows. First, there is a significant negative correlation between SEO and investment efficiency, meaning that firms with SEO have lower investment efficiency than firms without SEO. Second, the interaction variable between SEO and analyst participation showed a significant positive correlation with investment efficiency, meaning that the more active the analyst, the more any ineffective investment that is derived from managers’ opportunistic earnings management is suppressed. The results show that the efficient operation of procured capital is important for the sustainability of the firm, and that the analyst plays an important role in monitoring the efficient allocation of resources as an external auditor.

The Impact of IPOs’ Analyst Coverage on the Choice and Timing of SEOs

2018 ◽  
pp. 330-358
Author(s):  
Nesrine Bouzouita ◽  
Carole Gresse
Keyword(s):  
Survival Analysis ◽  
Initial Public Offerings ◽  
Seasoned Equity Offerings ◽  
Equity Offerings ◽  
Analyst Coverage ◽  
Public Offerings ◽  
Firm Commitment ◽  
The Impact

Based on a survival analysis on a sample of initial public offerings (IPOs) undertaken on Euronext and their subsequent seasoned equity offerings (SEOs) over the period 1995–2012, this chapter shows that analyst coverage in the months following an IPO facilitates subsequent SEOs and favors the longevity of the firm’s relationship with its initial underwriter. SEOs are facilitated in several dimensions: post-IPO analyst coverage increases the likelihood of the IPO firm to conduct an SEO with a firm commitment underwriting; it increases the occurrence speed of that SEO; and it increases the probability of that SEO to be intermediated by the same underwriter as the IPO.

scholarly journals Does Financial Market Structure Affect the Cost of Raising Capital?

2020 ◽  
pp. 1-38
Author(s):  
James Brugler ◽  
Carole Comerton-Forde ◽  
Terrence Hendershott
Keyword(s):  
New York ◽  
Market Structure ◽  
Stock Exchange ◽  
Seasoned Equity Offerings ◽  
Trading Costs ◽  
Equity Offerings ◽  
Institutional Trading ◽  
York Stock Exchange ◽  
The One ◽  
The Cost

Abstract We provide evidence on market structure and the cost of raising capital by examining changes in market structure in U.S. equity markets. Only the Order Handling Rules (OHR) of the Nasdaq, the one reform that reduced institutional trading costs, lowered the cost of raising capital. Using a difference-in-differences framework relative to the New York Stock Exchange (NYSE) that exploits the OHR’s staggered implementation, we find that the OHR reduced the underpricing of seasoned equity offerings by 1–2 percentage points compared with a pre-OHR average of 3.6%. The effect is the largest in stocks with the largest reduction in institutional trading costs after the OHR.

The Effects of Covenant Violations on the Underpricing of Seasoned Equity Offerings and the Implied Cost of Equity Capital

2016 ◽  
Vol 06 (01) ◽  
pp. 1640003 ◽  
Author(s):  
Anh Ngo ◽  
Hong Duong ◽  
Anthony Chen
Keyword(s):  
Earnings Forecasts ◽  
Seasoned Equity Offerings ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Equity Offerings ◽  
Negative Effects ◽  
The Impact ◽  
Covenant Violations ◽  
Implied Cost Of Equity

This study examines the impact of covenant violations on the implied cost of equity capital and the underpricing of seasoned equity offerings (SEOs). Using a novel dataset of 1,028 first-time covenant violations from 1996–2011, we find a higher level of SEO underpricing during the period immediately following covenant violations. This suggests that creditors require violating firms to issue equity to lower leverage and that equity investors interpret the violation negatively. We also find that violating firms experience an average increase of 8.48% in the implied cost of equity capital. By comparing analysts’ earnings forecasts before and after the violations, we conclude that the negative effects on equity owe to the loss of flexibility that accompanies covenant violations, and are not simply a reflection of the deteriorating health of the firm.

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