In seasoned equity rights offers, the standby underwriting contract resembles the sale of a put option. In the rights offering period, underwriters reduce their exposure to the standby underwriting by purchasing rights hedged with short sale of the common stock. Consistent with Eckbo and Masulis (1992), offers with large rights sell-offs during the offering period experience significant price decline. The offering period price decline and the nature of constraints confronting underwriters may partially explain the preference for general public offers.

We find that the underperformance of IPO stocks relative to the market over a three-year holding period is less severe for IPOs handled by more prestigious underwriters. Consistent with prior studies, we also find that IPOs managed by more reputable underwriters are associated with less short-run underpricing. Among the various existing proxies for underwriter reputation, the Carter–Manaster measure is the most significant in the context of initial returns and also in the context of the three-year performance of IPOs. The study also provides an updated list of the Carter–Manaster measure for various underwriters.

We examine earnings forecasts by sell-side analysts employed by a bank with a lending relationship with the covered firms. We find that lender-affiliated analysts’ forecasts are more accurate than forecasts by their unaffiliated peers after establishment of the lending relationship. Evidence from exogenous variation suggests that the relationship is causal. Lender-affiliated analysts are also more likely to issue pessimistic forecasts below their peers’ consensus. These forecasts are likely to be followed by below-consensus earnings. The results suggest that lender-affiliated analysts enjoy an informational advantage that spills over from lending activities of banks.

We find that the underperformance of IPO stocks relative to the market over a three‐year holding period is less severe for IPOs handled by more prestigious underwriters. Consistent with prior studies, we also find that IPOs managed by more reputable underwriters are associated with less short‐run underpricing. Among the various existing proxies for underwriter reputation, the Carter–Manaster measure is the most significant in the context of initial returns and also in the context of the three‐year performance of IPOs. The study also provides an updated list of the Carter–Manaster measure for various underwriters.

Ofer and Natarajan (1987) report negative, statistically significant cumulative average abnormal returns over five years following convertible bond calls. We show that these results are obtained only if returns preceding the call dates are used for market model parameter estimation. Returns preceding calls tend to be positive and unusually large. This means that predicted post-call returns, based on pre-call parameter estimates, are biased upward. Consequently, the corresponding abnormal returns are biased downward. We also discuss a corrected test statistic. We conclude that the evidence does not indicate market inefficiency in the stock price reaction to convertible calls.

We use India's unique regulatory design to test sentiment-based models of IPO initial returns. Using a sample of 362 Indian offerings from 2003 to 2014, we find that the traditional measure of IPO underpricing averages 23%. We decompose the traditional underpricing measure into two components: one related to voluntary underpricing by the underwriter and the other component related to the IPO's first-day trading activity. We find minimal levels of voluntary underpricing. However, initial returns on the first day average 14% and are primarily driven by the unmet demand of non-institutional investor groups. Overall, our results support sentiment-based models of IPO initial returns.

Average common stock price responses to convertible preferred stock calls are significantly negative only when firms employ underwriters to assure conversion. Previous work reports similar results for convertible bond calls; we find that the stock price reaction does not depend upon the type of convertible security being called. The results support the idea that managers are more likely to have calls underwritten the more unfavorable their private information about firm value.

Common-stock prices fall a statistically significant 2 percent in response to underwritten convertible debt call announcements. We find that the significant negative price reaction is confined to underwritten calls — stock-price responses to non-underwritten calls average an insignificant −0.84 percent. The results support the idea that managers are more likely to use underwriters the more unfavorable the information they possess about future firm cash flows. An agency cost interpretation of underwritten calls is also consistent with the results, but is not supported by management ownership and corporate liquidity evidence.