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Both issuing firms and underwriters shall benefit from the associations in underwriting contracts for seasoned equity offerings (SEOs). Issuing firms that are offered underwriting contracts with clustered gross spreads do not have strong incentives to switch away from the firms' prior SEO underwriters, and thus these existing underwriters are able to maintain or gain greater market share. This study investigates how the clustering of percentage gross spreads affects the likelihood of underwriter switching.

Using the investment bank-underwritten SEOs in Hong Kong, the authors find that the percentage gross spreads of 40% of these SEOs are clustered at 2.5%. The seemingly unrelated bivariate probit model, Weibull survival mixed model and trivariate probit model are applied to analyse this phenomenon.

The authors' study provides first direct evidence that the clustering of percentage gross spreads lowers the likelihood of underwriter switching. Investment banks as underwriters can explicitly price underwriting contracts at a clustered level, more likely in periods of greater market volatility, and intentionally retain the banks' client firms using pricing arrangements. The authors' finding and approach offer more direct and distinct support that the issuer–underwriter association can be relationship-based.

Whilst the clustering of fees is interpreted as a type of anticompetitive price sitting, the authors contribute to literature by providing new empirical evidence on why percentage gross spreads as a price dimension are clustered. On top of contract efficiency and collusion, this study's new evidence provides a third view for the clustering of gross spreads.

In this study we analyze the determinants of the type and structure of debt included in dual offerings of debt and equity. Our sample consists of 54 dual offerings of convertible bond and common stock (CBCS) and 258 dual offerings of straight bond and common stock (SBCS). We find that firms with high asset substitution problems are more likely to issue CBCS offerings instead of SBCS offerings. These firms are also more likely to include convertible bonds with a high probability of conversion in the issue. The probability of CBCS offerings is higher for firms with low information asymmetry and during high interest rate periods. We also find that the announcement returns of CBCS offerings are lower than the returns of SBCS offerings.

Using a sample of 6,198 US firms that went public from 1975 to 2004, the purpose of this paper is to examine when these firms come back to the equity market and investigate the determinants of the timing decision.

By properly modeling the time between two consecutive equity offerings using the duration analysis, the author tests different hypotheses in a unified framework and investigates their relative importance in explaining the timing decision of seasoned equity issuance.

The paper documents that firms often return for a new round of equity issuance shortly after the preceding one. First seasoned equity offerings (SEOs) after the IPO are more likely to be conducted at a faster speed than subsequent (follow-on) SEOs. The duration analysis shows that first SEOs are more likely to ride the aggregate stock market wave and take advantage of the idiosyncratic mispricing of the stock than follow-on SEOs. On the contrary, both macroeconomic and firm-specific growth opportunities are more important for follow-on SEOs than for first SEOs.

The paper employs a novel econometric method to depict a dynamic picture of SEO decisions. The results provide a possible explanation to reconcile the discrepancies in the findings of prior studies. Namely, those studies examining mostly first SEOs could bias toward the timing hypothesis, while those studies focussing on follow-on SEOs is more likely to find evidence that supports the need for growth.

The purpose of this paper is to empirically examine the relationship between the level of underwriter spread and ownership structure by using data from Japanese IPO firms that are issued during the years 1997‐2002.

The paper uses regression analysis to determine the effect of the ownership structure (board, bank, affiliated venture capital firms) on underwriter spread and on the post‐issue operating performance of IPO firms.

This paper finds several results that are in contrast with previous studies. The ownership by board members is positively associated with the level of gross spread but is not associated with post‐issue operating performance. The presence of a commercial bank in the ownership structure of IPO firms decreases the gross spread and increases the post‐issue operating performance of IPO firms. Issuers pay a lower underwriting fee as the ownership share of the lead underwriter‐affiliated VC increases, unlike that of other VCs.

The results of this paper, supporting certification and monitoring hypotheses, contribute to academic research. Most previous studies do not support certification effects.

Chen and Ritter (2000) documented that underwriter spreads for recent US initial public offerings (IPOs) in $20 million range as well as much larger IPOs in the $80 million range are clustered at 7%. This observation has led to a Department of Justice (DOJ) enquiry into potential price fixing by underwriters. We demonstrate through a times series analysis that IPOs have tripled in size and become much riskier over time. A pooled data analysis can therefore mask evidence of competition in the market. We find that spread clustering is not a recent phenomenon. Over time, clustering at 7% has increased as clustering above 7% has declined. IPO spreads have declined significantly over time as the firms going public more recently are riskier, underwriting efforts have increased and recent IPOs are much larger than IPOs in the past. Controlling for time trends, larger IPOs have lower average spreads. The market for underwriting IPOs seems to be competitive with entry of new firms during the hot markets.

We investigate whether external investment banks or internal key IPO insiders such as company directors and officers, venture capitalists and institutions that hold an IPO's stock serve as effective monitors of IPO investments over the post-IPO period. We measure median changes in each group's holdings for the sample, finding large changes in these values during a long-run holding period. We find that long-run buy-and-hold returns (BHARs) are positively related to the lead investment bank underwriter reputation and the gross spread demonstrating that the external monitoring by investment banking firms increases the post-IPO firm's value. Holding the underwriter reputation constant, we find that the BHARs are positively related to the gross spread, also indicative of the value of monitoring by external investment banks.

The purpose of this paper is to relate the fees paid to IPO underwriters to the nature and quality of the services they provide.

Controlling for the characteristics of the firm going public, the risk associated with the offering, and the reputation of the underwriter, the authors study on a sample of Italian IPOs whether a formal commitment by underwriters to provide ancillary services allows them to charge higher fees.

The authors document that asking underwriters to stabilize stock price is costly to the issuer, while to support liquidity is not. The authors’ also show that underwriters stabilize IPOs that really need it, whereas the provision of liquidity support does not seem to be always aligned with the issuer’s interest.

Investigating the Italian underwriting market is instructive for two main reasons. First, the institutional setting in IPOs is similar to most continental European countries, but significantly different from the US market. For instance, allocation policies in US IPOs are discretionary for both retail and institutional investors, while in Europe shares cannot be discretionarily allocated to retail investors. Second, the Italian market offers the opportunity to study the going-public decision outside the typical Anglo-Saxon financial systems. This is of interest because while both the UK and the USA have well-developed equity markets and a related industry of financial intermediation centered on providing equity, our analysis sheds light on financial intermediation of IPOs in a bank-centered system.

Resource redeployment may occur when a firm exits from one line of business and enters another. We suggest that when multiproduct firms identify opportunities in new high-growth markets, their entry will occur alongside exit from low-growth markets when the firm is resource-constrained. For our sample of over 47,000 high-tech US firms in CorpTech from 1993 to 2004, 5% of the firm-years include simultaneous entry and exit at the product market level, which we term “product turnover.” Firms are more likely to engage in product turnover when there is a larger spread between the highest and lowest growth rates for the product markets in the firm’s portfolio. This effect is strongest for small- and medium-sized firms, which tend to be privately held. Therefore, future research on resource redeployment might find fruitful ground in samples of mid-size firms.

The purpose of this paper is to investigate whether all of the risk factors were priced during the internet bubble period.

A unique hand collected dataset was used from public prospectuses for companies that issued an initial public offering during the internet bubble period. Three hypotheses were proposed: the risk factors mentioned in the prospectus are important for IPO trading and therefore affect IPO underpricing; risk factors affect the IPO deal attributes; and the number of risk factors cited by the issuing firm is affected by direct participants such as venture capitalists and investment bankers.

It was found that hi‐tech dummy played a significant role during the bubble period. Moreover, not all risk factors are regarded important, some of them are not significant at all as predicted by first hypothesis. The most striking observation is the negative economic significance of the risk factor no prior market for the traded stock. This reveals that, traders are selective in valuing risks and may value some factors as opportunities and not as risk factors. In addition, the results reveal that risk factors do affect the deal attributes as predicted by our second hypothesis. Also, the pricing of these risk factors are not different between retail and hi‐tech companies. Regarding the participants, it was found that venture capitalists and investment bankers have a significant statistical and economic effect on the number of risk factors reported in the prospectus.

The paper contributes to the literature by investigating the IPO underpricing phenomenon in the internet bubble period.

The purpose of this paper is to test the fundamental purpose of the 1992 Small Business Incentive Act (SBIA) to reduce the regulatory burden for small firms to raise public equity capital.

Our research compares initial public offerings (IPOs) that filed with the newer SB‐2 program to benchmark firms that filed using the traditional S‐1 filing. The authors use three proxies to measure success, hypothesizing that, if the regulatory burden has indeed been reduced for small firms, all three variables should be smaller for SB‐2 IPOs. Univariate and multivariate analyses were conducted.

With regards to easing regulatory costs, it is found that the program has not been effective. On average, SB‐2 IPOs experience larger‐scaled offering expenses, and pay higher underwriter gross spreads compared to S‐1 IPOs of similar size. SB‐2 IPOs, however, take fewer days to complete the registration process, when controlling for other relevant factors. In the burden of time, the SBIA has been effective.

The paper is of value to managers of firms desiring to conduct an IPO. These managers, if they meet the size requirements dictated by the SEC, can elect to use an SB‐2 or an S‐1 document. The paper shows that if cost is the primary concern, the S‐1 program should be preferred. If time is the primary consideration, then the SB‐2 program is preferred.

To the authors' knowledge, they are the first to test the efficacy of the SBIA program.