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IPO Placement Risk and the Number of Co‐Managers

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  • Wallace N. Davidson
  • Biao Xie
  • Weihong Xu

Abstract

Previous studies show that co‐managers mainly affect initial public offering (IPO) aftermarket activities. We investigate the role of co‐managers in IPO pre‐market activities. We argue that co‐managers help reduce IPO placement risk and hypothesize that IPO issuers hire more co‐managers when placement risk is higher. We find the number of co‐managers is positively associated with three proxies for placement risk. IPOs with more price uncertainty and high‐tech IPOs hire more co‐managers, while IPOs in regulated industries hire fewer co‐managers. We also find larger IPOs, recent IPOs, and IPOs with more reputable lead underwriters hire more co‐managers.

Suggested Citation

  • Wallace N. Davidson & Biao Xie & Weihong Xu, 2006. "IPO Placement Risk and the Number of Co‐Managers," The Financial Review, Eastern Finance Association, vol. 41(3), pages 405-418, August.
    • Handle: RePEc:bla:finrev:v:41:y:2006:i:3:p:405-418
    DOI: 10.1111/j.1540-6288.2006.00149.x
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    Cited by:

    1. Tim Jenkinson & Howard Jones, 2009. "Competitive IPOs," European Financial Management, European Financial Management Association, vol. 15(4), pages 733-756, September.

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