The Marketing of Seasoned Equity Offerings
By Xiaohui Gao, Jay R. Ritter. 2010
375 citations recorded by the source corpus.
In an accelerated seasoned equity offering (SEO), an issuer foregoes the investment bank's marketing efforts in return for a lower fee. To explain why many issuing firms choose a higher cost fully marketed offer, we posit that the marketing effort flattens the issuer's short-run demand curve. Alternatively stated, with a fully marketed offer, the issuer is paying investment bankers to create demand, making the elasticity of demand at the time of issuance an endogenous choice variable. Empirical analysis shows that both the pre-issue elasticity of the issuing firm's demand curve and the offer size are important determinants of the offer method choice. We find evidence of a large transitory increase in the elasticity of demand for issuers conducting fully marketed SEOs.
Subfields: Accounting, Finance, Strategy and Management
View Paper: https://www.semanticscholar.org/paper/bdaf63d7ef29b9adf53dc3c19b51d1fbfb89b625
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In Accounting
- Malcolm P. Baker
- Jeffrey Wurgler
- Turan G. Bali
- Yi Tang
- Yannan Shen
- Junbo Wang
- Lin Peng
- Stephen J. Brown
In Finance
- Turan G. Bali
- Yi Tang
- Malcolm P. Baker
- Jeffrey Wurgler
- Scott Murray
- Stephen J. Brown
- Yannan Shen
- Lin Peng
In Strategy and Management
- Malcolm P. Baker
- Jeffrey Wurgler
- Junbo Wang
- Lin Peng
- Stephen J. Brown
- Yi Tang
- Haoyu Gao
- Scott Murray
Citations in the corpus
- Asset Price Dynamics with Slow-Moving Capital (2010, neutral): “Source: Mitchell, Pulvino, and Stafford (2004). and Ritter (1995), Chaisurote (2008), and Gao and Ritter (2009).”
- Behavioral Corporate Finance: An Updated Survey (2011, positive): “They may also be able to shape investor demand through investor relations, by marketing their shares in Gao and Ritter (2010), or allocating IPO shares in Zhang (2004).”
- Media Coverage and the Cost of Debt (2019, positive): “First, un-derwriters can provide fully marketed offers to issuers to create demand for their new securities through promotions (see Gao and Ritter (2010)).”
- Digesting Anomalies: An Investment Approach (2015, neutral): “We adjust the trading volume of NASDAQ stocks per Gao and Ritter (2010). Monthly value-weighted decile returns are calculated for the current month t, and the deciles are rebalanced at the beginning of month t+ 1.”
- Capital Market-Driven Corporate Finance (2009, neutral): “For example, earnings management through pension fund assumptions is more common prior to mergers and acquisitions (Bergstresser et al. 2006), and firms actively market their stock in anticipation of an equity offering to flatten their demand curve (Gao & Ritter 2008).”
- Liquidity Shocks and Stock Market Reactions (2014, positive): “…LIQCU, as the negative difference between the realized ILLIQ of stock i and its conditional mean estimated from the ARMA(1,1) model in month t, −εi,t in equation (3).9 7Following Gao and Ritter (2010), we adjust for institutional features of the way that Nasdaq and NYSE/Amex volume are counted.”
- The Empirical Analysis of Liquidity (2014, neutral): “when making financing decisions (see also Gao and Ritter [2010] who”
- Managing Underwriters and the Marketing of Seasoned Equity Offerings (2010, positive): “Wurgler and Zhuravskaya (2002) and Gao and Ritter (2008) suggest that the residual volatility of a stock can be used as a slope measure of the demand curve.”