Investment Banker Directors and Seasoned Equity Offerings

We examine how directors with investment banking experience affect firms’ capital raising activities. We find that firms with investment bankers on their boards have a higher probability of making seasoned equity offerings (SEOs), and that these offerings are associated with higher announcement returns, lower underpricing, and lower underwriter spreads. These results are consistent with the idea that investment banker directors reduce information asymmetry between issuers and the equity market. We find a limited role of investment banker directors in firms issuing bonds or obtaining loans, which are less information-sensitive than equity. Overall, our results highlight the advisory role of specialist directors in shaping corporate policies.