Underwriter competition in accelerated seasoned equity offerings: Evidence from Canada

Accelerated seasoned equity offerings (SEOs) are now the most common form of SEO in the United States, Canada and Europe. Canadian accelerated SEOs do not feature competitive bidding for underwriting mandates. Using field study data from both issuers and underwriters, as well as secondary data, we investigate underwriter competition in this market. We find competition, but not on the basis of underwriting fee. Instead underwriters compete by building, maintaining and defending relationships with issuers. These relationships benefit both parties: underwriters stabilize their deal flow, permitting them to efficiently use their established capacity, and issuers secure reliable access to underwriting services.