IPO Placement Risk and the Number of Co-Managers

Posted: 18 May 2006

See all articles by Wallace N. Davidson

Wallace N. Davidson

Southern Illinois University at Carbondale - Department of Finance

Biao Xie

Southern Illinois University at Carbondale - Department of Finance

Weihong Xu

State University of New York (SUNY) - Accounting & Law

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Abstract

Previous studies show that co-managers mainly affect IPO aftermarket activities. We investigate the role of co-managers in IPO premarket 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.

Keywords: initial public offering, placement risk, co-manager, underwriter, pre-market, book building

JEL Classification: G24, G32

Suggested Citation

Davidson, Wallace N. and Xie, Biao and Xu, Weihong, IPO Placement Risk and the Number of Co-Managers. Financial Review, Vol. 41, No. 3, August 2006, Available at SSRN: https://ssrn.com/abstract=902712

Wallace N. Davidson (Contact Author)

Southern Illinois University at Carbondale - Department of Finance ( email )

Mail Code 4626
Carbondale, IL 62901-4626
United States
618-453-1429 (Phone)
618-453-5626 (Fax)

Biao Xie

Southern Illinois University at Carbondale - Department of Finance ( email )

Mailcode 4626
Carbondale, IL 62901-4626
United States
618-453-2459 (Phone)

Weihong Xu

State University of New York (SUNY) - Accounting & Law ( email )

Buffalo, NY 14260
United States
716-645-5434 (Phone)
716-645-3823 (Fax)

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