The rise of UK Seasoned Equity Offerings (SEOs) fees during the financial crisis: The role of institutional shareholders and underwriters

This paper investigates the increase in underwriting fees for UK SEOs since the beginning of the financial crisis in mid-2007. We develop and test a number of hypotheses related to the role of institutional shareholders and underwriters involved in the issuing process. We find that the rise in fees is related to the strengthening of the relative negotiating position of a specific underwriter in comparison to a specific issuer and to the growing influence of institutional shareholders with short-term investment horizons. Our evidence suggests that there may be reasonable grounds for considering potential conflicts of interest due to the dual role of institutional shareholders as investors and sub-underwriters. On the other hand, the ownership size of large shareholders and the reputation of underwriters have a moderating effect on fees, while the nationality of the institutional shareholders, the concentration of the investment bank industry and the experience of corporate issuers are not related to underwriting fees. (C) 2014 Elsevier B.V. All rights reserved.