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Information Risk And Underwriter Switching In Seos: Evidence From China, Wei Luo, Pingui Rao, Heng Yue
Information Risk And Underwriter Switching In Seos: Evidence From China, Wei Luo, Pingui Rao, Heng Yue
Research Collection School Of Accountancy
In this paper we examine whether information risk affects underwriter switching in a seasoned equity offering (SEO) process. Building on previous research, we hypothesize that SEO firms and underwriters associate with one another by mutual choice, and firms with a low degree of information risk tend to match up with prestigious underwriters. Using a sample of SEO firms in China and employing accruals quality as a proxy of information risk, we find evidence consistent with our hypothesis: the information risk and the initial public offering (IPO) underwriters’ reputation at the time of the SEO jointly determine the probability that the …