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We examine conflicts of interests arising from the pricing of seasoned equity offerings (SEOs) in underwritten dividend reinvestment plans (DRIPs). A DRIP is a type of SEO that enables shareholders automatically to reinvest their dividend entitlements in the issuing company's shares. The underwriters have an incentive to sell stock during the DRIP pricing period in order to hedge price risk and/or to reduce the price at which shares are issued. Using individual brokers' transactions, we show that underwriting brokers engage in an abnormally high level of selling during the issue pricing period. Comparison of pricing period returns between stocks with underwritten DRIPs and a matched sample of non-underwritten DRIPs shows that significantly more negative returns accrue to firms that have their issues underwritten. [ABSTRACT FROM AUTHOR]

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. [ABSTRACT FROM AUTHOR]