Do the Use of Proceeds Disclosure and Bank Characteristics Affect Bank Underwriters’ Certification Roles?

Abstract

This paper examines the relationship between the intended use-of-proceeds and the bank characteristics and the bank underwriters’ certification effect in Japan. We find that the bank underwriters are positively associated with the announcement return and the post-issue performance. However, if an issuer discloses that the intended use-of-proceeds is the repayment of loans, the bank underwriters are no longer associated with the announcement return and the post-issue performance. We also find that the banks’ equity holdings are negatively associated with the announcement return. We conclude that the bank certification effect differs depending on the disclosed intended use-of-proceeds and the bank characteristics.