Intended Use of Proceeds, Underwriter Quality and the Long-run Performance of SEOs in the UK

We document that prospectus disclosure of (i) the motives for a seasoned equity offering, and (ii) the choice of underwriter explain the long- run performance of equity issuers in the UK. Firms citing investment needs show no abnormal performance after the offering and have higher investment rates post-issue compared to the period before the offering. Issuers that state general corporate purposes and recapitalisation motives underperform, have similar investment rates pre-and post-issue, and their leverage tends to increase after the offering. Further, consistent with the certifying role of underwriters, equity issues underwritten by highquality brokers show no evidence of post-issue abnormal returns, but offerings taken public by low-quality underwriters exhibit negative abnormal performance. Together, our results document the significant role that prospectus information on the intended use of offering proceeds and on the underwriter play in predicting issuers post-offering performance in the UK.