The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Underwriter Compensation and Corporate Monitoring
Published: 09/01/1992 | DOI: 10.1111/j.1540-6261.1992.tb04669.x
ROBERT S. HANSEN, PAUL TORREGROSA
Studies suggest that underwriting syndicates provide marketing services and certify the fairness of offer prices. We argue that syndicate lead banks also monitor manager effort, increasing the value of capital‐raising companies. A given level of monitoring is associated with a given level of intrinsic value, so there is a “schedule” of certifiable offer prices, depending on the level of monitoring. Monitoring, marketing, and certification are, therefore, all legitimate syndicate functions. New evidence supporting the conclusion that syndicates provide corporate monitoring is presented.
Direct Equity Financing: A Resolution of a Paradox
Published: 06/01/1982 | DOI: 10.1111/j.1540-6261.1982.tb02215.x
ROBERT S. HANSEN, JOHN M. PINKERTON
When raising new equity capital managers have historically rejected the direct offer method favoring instead the seemingly more expensive underwritten public issue. This paper provides a resolution for this equity financing paradox by demonstrating empirically that firms which engage in direct offers enjoy a comparative cost advantage that is more than sufficient to account for the absolute reported cost differences between the two methods of equity financing.