Why Chinese listed companies frequently switch lead underwriters in seasoned equity offerings: A perspective of listed companies' loyalty
AbstractPurpose–The purpose of this paper is to explore the reasons for the high-frequency switches of lead underwriters by Chinese listed companies in their seasoned equity offerings. It contributes to the literature by filling the gap and providing evidence that institutional and non-market factors could affect listed companies' decisions to switch their lead underwriters in the Chinese capital market. Design/methodology/approach–This paper employs a numerical measure of listed companies' loyalty to evaluate their frequency of switching lead underwriters, and employs a Logit model and an OLS model to identify the key determinants of switching lead underwriters by Chinese listed companies. Findings–It is observed that the frequency of switching lead underwriters is very high among Chinese listed companies for their seasoned offerings. It is also found that underwriters' deficient reputation and the lack of industrial experience, together with the depreciation of relationship-specific assets, could have important impacts on lead underwriters being frequently switched in China. Besides, the frequent switches of lead underwriters could also be attributable to the non-market supervision and regulatory influences by Chinese authorities over the security underwriting market. Originality/value–This paper could help further the understanding of the factors that could explain the listed companies' frequent switches of their lead underwriters for their seasoned offerings in China. In addition, this paper has policy implications on how to improve the listed companies' loyalty for regulators in China. These implications could help improve the regulatory environment and promote the overall performance of the Chinese security underwriting market
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Bibliographic InfoArticle provided by Emerald Group Publishing in its journal China Finance Review International.
Volume (Year): 1 (2011)
Issue (Month): 3 (June)
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Web page: http://www.emeraldinsight.com
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Find related papers by JEL classification:
- G20 - Financial Economics - - Financial Institutions and Services - - - General
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
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- Chitru S. Fernando & Vladimir A. Gatchev & Paul A. Spindt, 2005. "Wanna Dance? How Firms and Underwriters Choose Each Other," Journal of Finance, American Finance Association, vol. 60(5), pages 2437-2469, October.
- Carter, Richard B & Manaster, Steven, 1990. " Initial Public Offerings and Underwriter Reputation," Journal of Finance, American Finance Association, vol. 45(4), pages 1045-67, September.
- Ongena, Steven & Smith, David C., 2001. "The duration of bank relationships," Journal of Financial Economics, Elsevier, vol. 61(3), pages 449-475, September.
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