The role of co-managers in reducing flotation costs: Evidence from seasoned equity offerings |
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Authors: | Jin Q. Jeon James A. Ligon |
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Affiliation: | a Dongguk Business School, Dongguk University-Seoul, Seoul, Republic of Korea b Department of Economics, Finance & Legal Studies, The University of Alabama, Tuscaloosa, AL, United States |
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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. |
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Keywords: | G21 G24 |
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