Review of Financial Studies Vol. 16 No. 3 2003
Underwriter Certification and Japanese Seasoned Equity Issues
Abstract
In sharp contrast to results in the United States, the average stock price response to an announcement of a seasoned equity issue in Japan is positive. Offer prices in Japan, unlike the United States, are announced several days before the beginning of the subscription period and incorporate a substantial discount. We suggest that the positive announcement effects in Japan are consistent with the underwriter's certification of the issuing firm's value. We characterize the underwriter's risk as a put option and find a positive association between the underwriter's risk and the announcement returns, as well as other results consistent with underwriter certification.
- Volume
- 16
- Issue
- 3
- Pages
- 949-982
- Sources
- bibtex:phds-export.bib