TY - JOUR
T1 - The role of co-managers in reducing flotation costs
T2 - Evidence from seasoned equity offerings
AU - Jeon, Jin Q.
AU - Ligon, James A.
PY - 2011/5
Y1 - 2011/5
N2 - We examine the effect on expected flotation costs of including co-managers in the underwriting syndicate. We consider five components of SEO flotation costs: announcement returns, underpricing, the probability of withdrawals, offering delays, and underwriting spreads. The results show that the characteristics of co-managers participating in syndicates have significant effects on flotation costs, while the effect of the number of co-managers is largely insignificant. Our results are consistent with the notion that highly reputable underwriters and commercial banks serving as co-managers serve a certification role, reducing information asymmetries and, as a result, lowering SEO flotation costs.
AB - We examine the effect on expected flotation costs of including co-managers in the underwriting syndicate. We consider five components of SEO flotation costs: announcement returns, underpricing, the probability of withdrawals, offering delays, and underwriting spreads. The results show that the characteristics of co-managers participating in syndicates have significant effects on flotation costs, while the effect of the number of co-managers is largely insignificant. Our results are consistent with the notion that highly reputable underwriters and commercial banks serving as co-managers serve a certification role, reducing information asymmetries and, as a result, lowering SEO flotation costs.
KW - Flotation costs
KW - G21
KW - G24
KW - Seasoned equity offerings
KW - Underwriting syndicates
UR - http://www.scopus.com/inward/record.url?scp=79952744655&partnerID=8YFLogxK
U2 - 10.1016/j.jbankfin.2010.09.023
DO - 10.1016/j.jbankfin.2010.09.023
M3 - Article
AN - SCOPUS:79952744655
SN - 0378-4266
VL - 35
SP - 1041
EP - 1056
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
IS - 5
ER -