Does the Intended Use of Proceeds and Bank’s Characteristics Affect the Bank Underwriters’ Certification Role? Evidence from Seasoned Equity Offerings


This paper examines the effects of the intended use of proceeds on bank underwriters’ certification roles in Japan following deregulation in 1999. We find that bank underwriters have a positive effect on announcement returns. However, when the issuer discloses that the intended use of proceeds is repayment, the bank underwriter has no effect on the announcement returns. Although banks’ holding loans have a positive effect on announcement returns, banks’ equity holdings are negatively associated with the announcement return. Furthermore, issuers underwritten by banks whose use of proceeds is loan repayment are more likely to be weak in their ex-post performance than those without repayment. We conclude that banks have different effects on issuers according to the intended use of proceeds and the banks’ characteristics.

JEL classification: G21; G24
Keywords: Commercial bank; Intended use of proceeds; Announcement return; Certification; Conflicts of interest.

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