The Role of Co-Managers in Reducing Flotation Costs: Evidence from Seasoned Equity Offerings
Posted: 30 Jun 2015
Date Written: 2011
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.
Note: processed, TOO OLD, ABSTRACT ONLY - vicki 6/30/15
Keywords: Underwriting syndicates, Flotation costs, Seasoned equity offerings
JEL Classification: G21 G24
Suggested Citation: Suggested Citation