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

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  • Jeon, Jin Q.
  • Ligon, James A.
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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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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 35 (2011)
    Issue (Month): 5 (May)
    Pages: 1041-1056

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    Handle: RePEc:eee:jbfina:v:35:y:2011:i:5:p:1041-1056

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    Web page: http://www.elsevier.com/locate/jbf

    Related research

    Keywords: Underwriting syndicates Flotation costs Seasoned equity offerings;

    References

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