Three Essays on Equity Issuance and Investment Banking

  • Zhe Wen

Student thesis: Phd


This thesis presents three empirical essays in the areas of equity issuance and investment banking. In the first essay, I document that an increasing number of initial public offering (IPO) firms have been allowed by their lead underwriters to conduct a seasoned equity offering (SEO) before IPO lockup expiry (pre-expiry SEO). I examine the determinants of pre-expiry SEOs and their impact on issuers' firm value. I find that issuers with stronger post-IPO stock performance and more reputable lead underwriters are more likely to issue pre-expiry SEOs. The three-day average abnormal return around the announcement day is -3.35% for pre-expiry SEOs compared to -1.70% for a control group of post-expiry SEOs. I predict that there would have been a three-day average abnormal return of -5.53% for the post-expiry control group had they conducted pre-expiry SEOs. I also find that pre-expiry SEO issuers tend to have better stock returns around IPO lockup expiry than other firms. Overall, my results suggest that it is 'better-quality' firms that are more likely to conduct pre-expiry SEOs.In the second study, I examine the impact of early IPO lockup release on issuers' decision to switch lead underwriters at their first SEO. With issuers using multiple lead underwriters, I distinguish between a complete switch (all leads are replaced) and a partial switch (at least one lead is retained). I find that none of the issuers that are allowed early release for a pre-expiry SEO completely switch underwriters at the SEO. The relative probability of a complete switch (vs. no switch) is much lower for issuers whose insiders are allowed to sell early in the open market. In the case of a partial switch, issuers tend to retain the more reputable lead underwriters. Overall, I provide strong evidence that granting issuers early IPO lockup release can help investment banks retain underwriting business.In the third essay, I document that the frequency of multiple-bookrunner SEOs increased dramatically from nearly zero in 1997 to more than 60% in 2013. With a sample of 2386 U.S. SEOs from 2001-2013, I examine the impact of multiple bookrunners on SEO offer price discounts and SEO gross spreads. After controlling for other influential factors and endogeneity or self-selection bias, I find that the offer price discount for a multiple-bookrunner SEO is 2.028% lower than that for a single-bookrunner SEO, while their gross spreads are not significantly different from each other. Overall, my results indicate that seasoned equity issuers should hire multiple bookrunners
Date of Award31 Dec 2015
Original languageEnglish
Awarding Institution
  • The University of Manchester
SupervisorSusanne Espenlaub (Supervisor) & Arif Khurshed (Supervisor)

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