Download or read book The Reputation of Underwriters, the Bonding Hypothesis, and the Impact on the Information Environment of U.S. Cross-listed Firms written by Gilberto Ramos Loureiro and published by . This book was released on 2007 with total page 166 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: The first essay of this dissertation tests whether hiring a reputable underwriter to sponsor equity offerings of foreign firms, that occur when they cross-list on a U.S. stock exchange, is a "reputational bonding" mechanism. In line with the Bonding Hypothesis of Stulz (1999) and Coffee (1999, 2002), I find that foreign firms that cross-list in the U.S. and undertake IPOs are more likely to employ reputable underwriters if the firms come from countries with poor shareholder protection. The additional monitoring provided by reputable underwriters may help overcome the skepticism of U.S. investors, and explains the higher valuation these firms obtain after the offering. There is, however, a price to be paid for this bonding benefit. I find that issuers from countries with low shareholder protection tend to be more underpriced if they are sponsored by prestigious underwriters. In the second dissertation essay, I examine whether the decisions to raise equity and hire a reputable underwriter to conduct the offering impacts the information environment of foreign firms cross-listed on a U.S stock exchange. Using a sample of cross-listed firms from 1980 to 2004, I find that those that raise equity and hire a reputable underwriter, within three years after cross-listing, observe higher analyst coverage and more accurate earnings forecasts. Furthermore, I conclude that these improvements in the firm's information environment are likely to positively affect firm value -- the empirical evidence shows a positive relation between analyst coverage/forecast accuracy and Tobin's q. More importantly, the valuation of firms sponsored by top underwriters tends to be more sensitive to improvements in forecast accuracy. Overall, the results of this essay complement the findings of Lang et al. (2003) and shed some light on the monitoring role of reputable underwriters via their impact on firm's information environment.