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

Jin Q. Jeon and James A. Ligon

Journal of Banking & Finance, 2011, vol. 35, issue 5, 1041-1056

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.

Keywords: Underwriting; syndicates; Flotation; costs; Seasoned; equity; offerings (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:35:y:2011:i:5:p:1041-1056

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