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- Title
Shelf Registration and the Reduced Due Diligence Argument: Implications of the Underwriter Certification and the Implicit Insurance Hypotheses.
- Authors
Blackwell, David W.; Marr, M. Wayne; Spivey, Michael F.
- Abstract
Critics argue that shelf registration greatly reduces the ability of underwriters to perform adequate due diligence. This argument suggests underwriters will demand greater compensation for shelf issues compared to such traditional issues as an insurance premium for protection against potential litigation or loss of reputation caused by inadequate due diligence. Our findings suggest the presence of such a premium, that the premium is higher for firms with higher expected due diligence liabilities, and that underwriters perceive that shelf registration erodes due diligence and, subsequently, price the due diligence erosion accordingly. This pricing behavior is consistent with our findings that firms with higher expected due diligence liabilities are more likely to choose traditional registration.
- Subjects
STOCK transfer; DUE diligence; INSURANCE rates; SHELF registration; INSURANCE companies; WAGES; LIABILITY insurance
- Publication
Journal of Financial & Quantitative Analysis, 1990, Vol 25, Issue 2, p245
- ISSN
0022-1090
- Publication type
Article
- DOI
10.2307/2330827