Title page for ETD etd-04262001-201956


Type of Document Dissertation
Author Altinkilic, Oya
URN etd-04262001-201956
Title An Examination of Seasoned Equity Offer Placement Effort
Degree PhD
Department Finance, Insurance, and Business Law
Advisory Committee
Advisor Name Title
Hansen, Robert S. Committee Chair
Keown, Arthur J. Committee Member
Pinkerton, John M. Committee Member
Shome, Dilip K. Committee Member
Thompson, G. Rodney Committee Member
Keywords
  • Issuance
  • Investment Banking
Date of Defense 2001-04-19
Availability unrestricted
Abstract
AltinkiliƧ and Hansen (2000) show that underwriter spreads in seasoned equity offerings (SEOs) overwhelmingly reflect variable costs. This research attempts to begin filling the gap created by this result, as to what are the important constituents of the variable costs. In particular, I investigate the hypothesis that an important part of underwriter compensation is partial payment for anticipated market making activities in the secondary market, once the offer begins. I show that lead underwriter market making activities following an SEO are partly paid through the spread. The lower bound cost estimates show that the spreads for firms likely to require the most market making services are on average 100 basis points higher than those requiring the least services. On average, the compensation for market making activities amounts to 20% of the lead underwriter's total compensation. The results are robust to several considerations.
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