Underwriter Relationships and Shelf Offerings

Abstract

Shelf offerings have risen in importance from 18% of all offerings in 1997 to 81% in 2007. Unlike in traditional offerings, shelf offerings are conducted like an auction in which underwriters tender to place the firm’s shares. This implies that cost-considerations have a more important role in shelf offerings, and that underwriter switching in shelf offerings might have different drivers from traditional offerings. We examine the drivers of switching in shelf offerings and traditional SEOs. The results suggest that switching in shelf offerings and traditional offerings have different drivers: cost-considerations (underwriter reputation) motivate switching in shelf offerings (traditional offerings).