Audit Committee Characteristics and Pricing of Seasoned Equity Offerings

Abstract

This paper examines the association between audit committee (AC) characteristics and the degree of underpricing for companies issuing seasoned equity offerings (SEOs). In a sample of SEOs issued in 1998, the results suggest that companies composed entirely of independent AC members enjoy a lower degree of SEO underpricing. In addition, companies with an AC composed of competent directors experience lower underpricing. However, there is a partial support for the hypothesis that suggests a negative link between AC activity and underpricing. On general, these results support the notion that the characteristics of AC members improve companies' ability to mitigate information asymmetry and raise equity capital.