Underwriter Certification, Issuer-Underwriter Matching, and SEO Performance

The introduction of deal types for issues of seasoned equity in which the offer follows quickly after its announcement highlights the role of underwriter certification in the performance of SEOs. Controlling for the matching between underwriters and issuers, underwriter quality is positively related to the announcement effect in rapidly completed SEOs. For these deal types, we also find that the discount is significantly negatively related to underwriter quality. For fully marketed deals we are unable to detect any significant relation between SEO performance and underwriter quality. Issuers pay for the value provided by high-quality underwriters with higher fees.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at "http://www.nber.org/papers/w26344"