The book-building period of seasoned equity offerings and issue costs

Abstract

We investigate the determinants of the book- building period for seasone dequity offerings. We find that the issuing firm's stock price performance , after the filing, negatively affects the length of the book - building period, which is consistent with Welch's (1992) 'cascade' hypothesis. When we investigate underwriting spreads and stock price movements in relation to the book- building period , we find that issue costs are significantly higher for offerings with longer book-building periods (late offerings) than for offerings with shorter book-building periods (early offerings). We also examine the overallotment option to determine whether or not a relation between the book- building period and demand for new issue exists. We find that late offerings are

characterized by weak demand.