An Examination of Brazilian Equity Offerings

By Susan Hume and Rajneesh Sharma.

Published by The Global Studies Journal

Format Price
Article: Print $US10.00
Article: Electronic $US5.00

Despite the growing importance of Brazilian firms as a global investment opportunity, little has been written about this emerging market that only ten years ago faced severe capital restrictions. This paper examines the relationship between the role of the underwriter to the equity market by modeling underwriter prestige and fees. Using data from 2005 through 2007, the paper examines the relationship between various fees incurred by the firm for Initial Public Offerings (IPOs) and Seasoned Equity Offerings (SEOs). We find that the prestige of the underwriter is an important pricing consideration to the firm; selling concession is over 60% of total investment banking fees and underwriter and management fees are less than 20% each of total fees. The fees for IPOs are three to six times higher than SEOs. The prestige of the lead manager role is significant as higher ranked underwriters are associated with more shares issued and higher offering price. Moreover, institutional purchases are more likely if the lead manager is ranked higher.

Keywords: IPO, SEO, Brazil

Global Studies Journal, Volume 1, Issue 1, pp.115-122. Article: Print (Spiral Bound). Article: Electronic (PDF File; 575.634KB).

Dr. Susan Hume

Assistant Professor, School of Business, College of New Jersey, Ewing, New Jersey, USA

Susan Hume is Assistant Professor of Finance and International Business at The College of New Jersey.

Dr. Rajneesh Sharma

Assistant Professor, Finance Department, Haub School of Business, Saint Joseph’s University, Philadelphia, Pennsylvania, USA

Rajneesh Sharma is Assistant Professor of Finance at Saint Joseph’s University.

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