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The role of internal and external certification mechanisms in seasoned equity offerings

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  • Koerniadi, Hardjo
  • Krishnamurti, Chandrasekhar
  • Lau, Sie Ting
  • Tourani-Rad, Alireza
  • Yang, Ting

Abstract

When conducting their seasoned equity offerings (SEOs), US firms have been increasingly relying on shelf offering or accelerated offering rather than non-shelf offering or traditional book building, the predominant issuance methods in the past. Previous studies find that the unpopularity of shelf or accelerated offering in the past is due to the under-certification problem. Therefore, the change in firms’ preferred issuance methods suggests that firms must have obtained adequate certification through various ways. In this paper, we study several potential internal and external certification mechanisms that issuers can utilize and explore their roles in the SEO process. We find that the internal certification via sound corporate governance affects firms’ choice of the issuance method between shelf (accelerated) and nonshelf (non-accelerated) offerings, while the external certification through acquiring high-quality auditing services impacts the issuance costs.

Suggested Citation

  • Koerniadi, Hardjo & Krishnamurti, Chandrasekhar & Lau, Sie Ting & Tourani-Rad, Alireza & Yang, Ting, 2015. "The role of internal and external certification mechanisms in seasoned equity offerings," Journal of Multinational Financial Management, Elsevier, vol. 30(C), pages 110-127.
    • Handle: RePEc:eee:mulfin:v:30:y:2015:i:c:p:110-127
    DOI: 10.1016/j.mulfin.2015.04.001
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    References listed on IDEAS

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    Cited by:

    1. Puwanenthiren, Premkanth & Dang, Man & Henry, Darren & Puwanenthiren, Pratheepkanth & Al Mamun, Md., 2019. "Does managerial ability matter for the choice of seasoned equity offerings?," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 442-460.
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    3. Dang, Man & Puwanenthiren, Premkanth & Truong, Cameron & Henry, Darren & Vo, Xuan Vinh, 2022. "Audit quality and seasoned equity offerings methods," International Review of Financial Analysis, Elsevier, vol. 83(C).

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    More about this item

    Keywords

    Shelf offering; Accelerated offering; Seasoned equity offering; Flotation costs; Corporate governance;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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