The role of co-managers in reducing flotation costs: Evidence from seasoned equity offerings

Jin Q. Jeon, James A. Ligon

Research output: Contribution to journalArticlepeer-review

12 Scopus citations

Abstract

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.

Original languageEnglish
Pages (from-to)1041-1056
Number of pages16
JournalJournal of Banking and Finance
Volume35
Issue number5
DOIs
StatePublished - May 2011

Keywords

  • Flotation costs
  • G21
  • G24
  • Seasoned equity offerings
  • Underwriting syndicates

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