Business, Management and Accounting
4 years ago

Analyst Coverage Linked to Lower Costs for Raising Equity Capital

Contemporary Accounting Research
Analyst Coverage and the Cost of Raising Equity Capital: Evidence from Underpricing of Seasoned Equity Offerings*
Robert M. Bowen, Xia Chen, Qiang Cheng

Paper Summary

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Analyst coverage affects the cost of raising equity capital, as shown by the underpricing of seasoned equity offerings. Researchers analyzed data and found that companies with more analyst coverage tend to have lower underpricing when issuing new shares. This suggests that having more analysts covering a company can reduce the cost of raising capital through equity offerings.