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Do the equity holding and soundness of bank underwriters affect issue costs of SEOs?

  • Suzuki, Katsushi
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    This paper examines the effects of characteristics of bank underwriters on issue costs in seasoned equity offerings in Japan following deregulation in 1999. I find that banks' holding loans have a negative effect on price discounts and no effect on underwriting fees. However, banks' equity holdings have no effect on discount rates and a positive effect on underwriting fees. Furthermore, issuers with unhealthy banks pay higher discount rates, are more likely to be weak in their ex-post operating performance, and are less willing to switch underwriters. I conclude that the characteristics of banks have different effects on issue costs.

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    File URL: http://www.sciencedirect.com/science/article/B6VCY-4XJG5KW-3/2/ae5d7fc33b6d198b50b77dbd3c96c6c6
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    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 34 (2010)
    Issue (Month): 5 (May)
    Pages: 984-995

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    Handle: RePEc:eee:jbfina:v:34:y:2010:i:5:p:984-995
    Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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    1. Xu, Xijia, 2009. "Aligning debt and equity claimant interests: Evidence from dual claim investors," Journal of Banking & Finance, Elsevier, vol. 33(12), pages 2227-2240, December.
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    12. Morck, Randall & Nakamura, Masao & Shivdasani, Anil, 2000. "Banks, Ownership Structure, and Firm Value in Japan," The Journal of Business, University of Chicago Press, vol. 73(4), pages 539-67, October.
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    15. Kirkulak, Berna & Davis, Colin, 2005. "Underwriter reputation and underpricing: Evidence from the Japanese IPO market," Pacific-Basin Finance Journal, Elsevier, vol. 13(4), pages 451-470, September.
    16. Konishi, Masaru, 2002. "Bond underwriting by banks and conflicts of interest: Evidence from Japan during the pre-war period," Journal of Banking & Finance, Elsevier, vol. 26(4), pages 767-793, April.
    17. Hoshi, Takeo, 2001. "What Happened to Japanese Banks?," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 19(1), pages 1-29, February.
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