Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 20, 2022 erstellt
Beschreibung:
The fact that companies incur substantial costs when issuing new equity has been extensively documented in the empirical finance literature. In particular, numerous studies show that seasoned equity offerings (SEOs) tend to be priced significantly below prevailing market prices, thereby causing issuers to leave money on the table. Offer price discounting is an indirect flotation cost borne by pre-SEO shareholders that, according to extant theoretical and empirical research, arises due to asymmetric information. A heretofore unrelated literature spanning the fields of international business, finance, and accounting argues that corporate multinationalism, i.e., establishing operations outside a firm’s home country, exacerbates the asymmetric information problem via greater difficulty and cost to shareholders of monitoring a firm’s foreign operations. Motivated by the arguments and findings from these two literatures, this paper investigates whether offer price discounting is a function of corporate multinationalism. Using a large sample of SEOs by U.S. headquartered firms during 1998-2016, I find that SEOs by multinational firms are, on average, discounted significantly more than offerings by purely domestic firms after controlling for known determinants of SEO discounts. This effect is stronger for multinational firms with foreign subsidiaries spread across a greater number of countries and weaker for multinationals that hire a high-reputation underwriter to lead the underwriting syndicate. These findings suggest that asymmetric information costs borne by seasoned equity issuers are increasing in the geographic scope of a firm’s operations, which can be mitigated by certification from a highly reputed lead underwriter