We would like to thank Jack McElwee and an anonymous referee for helpful comments and suggestions. All remaining errors, however, are ours.
IS THERE A SIGNALING EFFECT OF UNDERWRITER REPUTATION?
Article first published online: 27 AUG 2014
© The Southern Finance Association and the Southwestern Finance Association
Journal of Financial Research
Volume 24, Issue 1, pages 27–43, Spring 2001
How to Cite
Helou, A. and Park, G. (2001), IS THERE A SIGNALING EFFECT OF UNDERWRITER REPUTATION?. Journal of Financial Research, 24: 27–43. doi: 10.1111/j.1475-6803.2001.tb00816.x
- Issue published online: 27 AUG 2014
- Article first published online: 27 AUG 2014
In this article we examine the effect of underwriter reputation on the abnormal return due to an announcement to issue seasoned new equity. After controlling for other factors that relate asymmetric information to abnormal returns, underwriter reputation still significantly reduces the magnitude of the negative announcement effect. We also develop a procedure to extract a signaling component from the measure of underwriter reputation. We show that the signaling component of underwriter reputation positively and significantly affects abnormal returns. This result supports the notion that issuing firms use underwriter reputation as an effective instrument to signal that their stocks are not overvalued.
JEL classification: D82, G24, G30