Impact Of Canadian Sox On Determinants Of Equity Issuance Costs For Bought Deals And Marketed Underwritten Offers

This manuscript explores the effect of Canadian SOX (CSOX) on determinants of equity issuance costs (underwriting fees and offer price discount) for Canadian bought deals and marketed underwritten equity offers. CSOX is a crucial piece of legislation equivalent to the U.S. Sarbanes-Oxley Act. Bought deals and marketed underwritten offers are two methods of choice for issuing common stock by exchange-traded companies. Are the determinants of underwriting fees and price discount for both underwriting methods the same before and after the passage of Canadian law? From eleven expected determinants of underwriting fees, findings show gross offer proceeds is the only determinant significant in the pre-and post-CSOX periods for both bought deals and marketed underwritten offers. The determinant associated with stock return volatility is significant during the pre- and post-CSOX periods for bought deals only. On the other hand, from fourteen expected determinants of offer price discount, volatility of stock returns and stock spread are the only common determinant for the pre- and post-CSOX periods for bought deals only. In general, the results reveal the Canadian legislation had a different effect on determinants of issuance costs for both underwriting methods.