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Managing Underwriters and the Marketing of Seasoned Equity Offerings

Published online by Cambridge University Press:  10 November 2010

Rongbing Huang  and
Donghang Zhang
Rongbing Huang
Affiliation:
Coles College of Business, Kennesaw State University, 1000 Chastain Rd., Kennesaw, GA 30144. rhuang1@kennesaw.edu
Donghang Zhang
Affiliation:
Moore School of Business, University of South Carolina, 1705 College St., Columbia, SC 29208. zhang@moore.sc.edu
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Abstract

Using a sample of 2,281 seasoned equity offerings (SEOs) from 1995 to 2004, we show that the marketing of securities is important to issuers. The number of managing underwriters for an SEO is negatively related to the offer price discount, especially when the relative offer size is large and the stock return volatility is high. Larger investor networks of comanaging underwriters also lower offer price discounts. We argue that the evidence is supportive of the marketing hypothesis: The underwriters’ marketing efforts can lower the offer price discount by shifting up and flattening the demand curve of an SEO.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 46 , Issue 1 , February 2011 , pp. 141 - 170
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2011

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