IDEAS home Printed from https://ideas.repec.org/a/ibf/ijbfre/v9y2015i1p63-71.html
   My bibliography  Save this article

Impact of Sarbanes-Oxley Act on Seasoned Equity Offerings by Canadian Cross-Listed Firms: Evidence from Bought Deals vs. Firm Commitment

Author

Listed:
  • Atturo Rubalcava

Abstract

This paper examines the impact of the Sarbanes-Oxley Act on the market reaction and underwriting fees of two methods of choice for underwriting seasoned equity offerings: Bought deals and firm commitment, by Canadian firms cross-listed on major U.S. exchanges. After controlling for offer and firm characteristics, it finds the market reaction to offer announcements is more positive for bought deals than for firm commitment during the pre-Sarbanes period only. This shows that bought deals lost their indirect cost advantage after the passage of the Act. On the other hand, the underwriting fees are lower for bought deals than for firm commitment during the pre-Sarbanes period only. This shows that bought deals also lost their fees cost advantage after the passage of the Act.

Suggested Citation

  • Atturo Rubalcava, 2015. "Impact of Sarbanes-Oxley Act on Seasoned Equity Offerings by Canadian Cross-Listed Firms: Evidence from Bought Deals vs. Firm Commitment," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 9(1), pages 63-71.
    • Handle: RePEc:ibf:ijbfre:v:9:y:2015:i:1:p:63-71
    as

    Download full text from publisher

    File URL: http://www.theibfr2.com/RePEc/ibf/ijbfre/ijbfr-v9n1-2015/IJBFR-V9N1-2015-5.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Arturo Bris & Salvatore Cantale & George P. Nishiotis, 2007. "A Breakdown of the Valuation Effects of International Cross‐listing," European Financial Management, European Financial Management Association, vol. 13(3), pages 498-530, June.
    2. Stephen R. Foerster & G. Andrew Karolyi, 1999. "The Effects of Market Segmentation and Investor Recognition on Asset Prices: Evidence from Foreign Stocks Listing in the United States," Journal of Finance, American Finance Association, vol. 54(3), pages 981-1013, June.
    3. Kate Litvak, 2008. "The Long‐Term Effect of the Sarbanes‐Oxley Act on Cross‐Listing Premia," European Financial Management, European Financial Management Association, vol. 14(5), pages 875-920, November.
    4. Litvak, Kate, 2007. "The effect of the Sarbanes-Oxley act on non-US companies cross-listed in the US," Journal of Corporate Finance, Elsevier, vol. 13(2-3), pages 195-228, June.
    5. Butler, Alexander W. & Grullon, Gustavo & Weston, James P., 2005. "Stock Market Liquidity and the Cost of Issuing Equity," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 40(2), pages 331-348, June.
    6. Smith, Clifford Jr., 1977. "Alternative methods for raising capital : Rights versus underwritten offerings," Journal of Financial Economics, Elsevier, vol. 5(3), pages 273-307, December.
    7. David J. Denis, 1993. "The Costs Of Equity Issues Since Rule 415: A Closer Look," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 16(1), pages 77-88, March.
    8. Ari Pandes, J., 2010. "Bought deals: The value of underwriter certification in seasoned equity offerings," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1576-1589, July.
    9. Autore, Don M. & Kumar, Raman & Shome, Dilip K., 2008. "The revival of shelf-registered corporate equity offerings," Journal of Corporate Finance, Elsevier, vol. 14(1), pages 32-50, February.
    10. Lee, Gemma & Masulis, Ronald W., 2009. "Seasoned equity offerings: Quality of accounting information and expected flotation costs," Journal of Financial Economics, Elsevier, vol. 92(3), pages 443-469, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Arturo Rubalcava, 2018. "Financial Impact of Canadian Bill 198 on Seasoned Equity Offerings by Canadian Firms," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 4(1), pages 43-68, January.
    2. Arturo Rubalcava, 2021. "Determinants Of Price Response To Canadian Bought Deals And Marketed Underwritten Equity Offers: Evidence Before And After The Canadian Sox," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 15(1), pages 19-32.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Arturo Rubalcava, 2018. "Financial Impact of Canadian Bill 198 on Seasoned Equity Offerings by Canadian Firms," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 4(1), pages 43-68, January.
    2. Karpavičius, Sigitas & Suchard, Jo-Ann, 2018. "Institutional ownership and the choice of equity issue method," International Review of Financial Analysis, Elsevier, vol. 56(C), pages 73-84.
    3. Don M. Autore & Irena Hutton & Tunde Kovacs, 2011. "Accelerated Equity Offers and Firm Quality," European Financial Management, European Financial Management Association, vol. 17(5), pages 835-859, November.
    4. Chen, Hsuan-Chi & Dai, Na & Schatzberg, John D., 2010. "The choice of equity selling mechanisms: PIPEs versus SEOs," Journal of Corporate Finance, Elsevier, vol. 16(1), pages 104-119, February.
    5. Olga Dodd & Bart Frijns & Aaron Gilbert, 2015. "On the Role of Cultural Distance in the Decision to Cross†List," European Financial Management, European Financial Management Association, vol. 21(4), pages 706-741, September.
    6. Manuela Geranio, 2012. "Cross-listing and the Evolution of Global Stock Market Liquidity," Chapters, in: Geoffrey Poitras (ed.), Handbook of Research on Stock Market Globalization, chapter 9, Edward Elgar Publishing.
    7. Georgieva, Dobrina & Jandik, Tomas, 2012. "Alternative paths of convergence toward U.S. market and legal regulations: Cross-listing vs. merging with U.S. bidders," Journal of Multinational Financial Management, Elsevier, vol. 22(5), pages 230-251.
    8. Lee, Gemma & Masulis, Ronald W., 2009. "Seasoned equity offerings: Quality of accounting information and expected flotation costs," Journal of Financial Economics, Elsevier, vol. 92(3), pages 443-469, June.
    9. Kose John & Joe Shangguan & Ravi Mateti, 2015. "Financing activities after accounting restatements: an examination of SEOs and PIPEs," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 5(1), pages 139-160, June.
    10. Jeon, Jin Q. & Ligon, James A., 2011. "The role of co-managers in reducing flotation costs: Evidence from seasoned equity offerings," Journal of Banking & Finance, Elsevier, vol. 35(5), pages 1041-1056, May.
    11. Fodor, Andy & Gokkaya, Sinan, 2014. "Option implied volatilities and the cost of issuing equity," Journal of Banking & Finance, Elsevier, vol. 47(C), pages 88-101.
    12. Karolyi, G. Andrew, 2012. "Corporate governance, agency problems and international cross-listings: A defense of the bonding hypothesis," Emerging Markets Review, Elsevier, vol. 13(4), pages 516-547.
    13. 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.
    14. Arturo Rubalcava, 2021. "Determinants Of Price Response To Canadian Bought Deals And Marketed Underwritten Equity Offers: Evidence Before And After The Canadian Sox," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 15(1), pages 19-32.
    15. Bortolotti, Bernardo & Megginson, William & Smart, Scott B., 2007. "The Rise of Accelerated Seasoned Equity Underwritings," Privatisation Regulation Corporate Governance Working Papers 12190, Fondazione Eni Enrico Mattei (FEEM).
    16. Boubakri, Narjess & Cosset, Jean-Claude & Samet, Anis, 2010. "The choice of ADRs," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2077-2095, September.
    17. Holderness, Clifford G., 2018. "Equity issuances and agency costs: The telling story of shareholder approval around the world," Journal of Financial Economics, Elsevier, vol. 129(3), pages 415-439.
    18. Ghadhab, Imen, 2021. "Cross-listing and the alignment between short and long-run performance," Journal of Multinational Financial Management, Elsevier, vol. 62(C).
    19. Li, Hui & Liu, Hong & Siganos, Antonios & Zhou, Mingming, 2016. "Bank regulation, financial crisis, and the announcement effects of seasoned equity offerings of US commercial banks," Journal of Financial Stability, Elsevier, vol. 25(C), pages 37-46.
    20. Roosenboom, Peter & van Dijk, Mathijs A., 2009. "The market reaction to cross-listings: Does the destination market matter?," Journal of Banking & Finance, Elsevier, vol. 33(10), pages 1898-1908, October.

    More about this item

    Keywords

    Sarbanes-Oxley Act; Seasoned Equity Offerings; Cross-Listed; Market Reaction; Underwriting Fees; Bought Deals; Firm Commitment;
    All these keywords.

    JEL classification:

    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ibf:ijbfre:v:9:y:2015:i:1:p:63-71. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mercedes Jalbert (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.