Do institutional investors’ corporate site visits impact seasoned equity offering discounts? Evidence from detailed investor bids in SEO auctions

We examine the impact of institutional investor corporate site visits on seasoned equity offering (SEO) discounts. Using unique databases that give the identities of institutional investors making corporate site visits and the same investors making bids on SEOs, we document that when institutional investors make more corporate site visits before SEOs, they bid higher for the SEOs, leading to lower SEO discounts and this effect is more pronounced when institutional investors face higher information uncertainty. Additional analysis suggests that institutional investors have the ability to select high future performance SEO firms after their corporate site visits. The findings provide direct investor-level evidence consistent with that equity issuers can alleviate the adverse selection problem in the SEO process through hosting more site visits of potential investors.