Are Initial Returns and Underwriting Spreads in Equity Issues Complements or Substitutes?
- Authors
- Kim, Dongcheol; Palia, Darius; Saunders, Anthony
- Issue Date
- 2010
- Publisher
- FINANCIAL MANAGEMENT ASSOC
- Keywords
- Underwriting spread; equity issues; initial returns
- Citation
- FINANCIAL MANAGEMENT, v.39, no.4, pp.1403 - 1423
- Indexed
- SSCI
AHCI
SCOPUS
- Journal Title
- FINANCIAL MANAGEMENT
- Volume
- 39
- Number
- 4
- Start Page
- 1403
- End Page
- 1423
- URI
- https://scholar.korea.ac.kr/handle/2021.sw.korea/118503
- DOI
- 10.1111/j.1755-053X.2010.01117.x
- ISSN
- 0046-3892
- Abstract
- The objective of this paper is to analyze the joint behavior of underwriting spreads and initial returns on equity issues for a large sample of issues over a 21-year period. Traditional empirical approaches to the determination of these direct and indirect issuing costs view them as independent. Using a three-stage least squares approach, we find these costs to be positively and significantly related. In the case of seasoned equity offerings, our results are robust to replacing initial returns with the offer price discount. We also find that low quality issuers are charged higher underwriting spreads and initial returns when compared to high quality issuers.
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Collections - Korea University Business School > Department of Business Administration > 1. Journal Articles
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