TY - JOUR
T1 - Seasoned Equity Offers
T2 - The Effect of Insider Ownership and Float
AU - Intintoli, Vincent J.
AU - Kahle, Kathleen M.
PY - 2010/12
Y1 - 2010/12
N2 - Seasoned equity offering (SEO) underpricing has increased dramatically since the early 1980s. While previous research has examined the determinants of SEO underpricing, these studies have not explored the effect of insider ownership on discounts. We find that this effect is twofold. First, higher insider ownership reduces float, thereby increasing price pressure and SEO underpricing. This effect is greatest in firms with low liquidity. Second, the greater the percentage of secondary shares offered, the lower the underpricing, suggesting that manager's pressure banks to reduce underpricing when their personal wealth is at stake. However, we find that this negative relation is mitigated if the firm employs a prestigious underwriter.
AB - Seasoned equity offering (SEO) underpricing has increased dramatically since the early 1980s. While previous research has examined the determinants of SEO underpricing, these studies have not explored the effect of insider ownership on discounts. We find that this effect is twofold. First, higher insider ownership reduces float, thereby increasing price pressure and SEO underpricing. This effect is greatest in firms with low liquidity. Second, the greater the percentage of secondary shares offered, the lower the underpricing, suggesting that manager's pressure banks to reduce underpricing when their personal wealth is at stake. However, we find that this negative relation is mitigated if the firm employs a prestigious underwriter.
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U2 - 10.1111/j.1755-053X.2010.01123.x
DO - 10.1111/j.1755-053X.2010.01123.x
M3 - Article
AN - SCOPUS:78650053365
SN - 0046-3892
VL - 39
SP - 1575
EP - 1599
JO - Financial Management
JF - Financial Management
IS - 4
ER -