Hansen is from the R. B. Pamplin College of Business, Virginia Tech, Blacksburg, Virginia, and Torregrosa is from the College of Business, Marquette University, Milwaukee, Wisconsin. We thank Sanjai Bhagat, Dave Denis, Jay Ritter, and John Thatcher for helpful discussion and comments, and Atulya Sarin for able computing assistance. We also thank the referee and the editor René Stulz. Hansen acknowledges the R. B. Pamplin College of Business for partial financial support for this research and Torregrosa acknowledges the Marquette College of Business for partial financial support for this research.
Underwriter Compensation and Corporate Monitoring
Article first published online: 30 APR 2012
1992 The American Finance Association
The Journal of Finance
Volume 47, Issue 4, pages 1537–1555, September 1992
How to Cite
HANSEN, R. S. and TORREGROSA, P. (1992), Underwriter Compensation and Corporate Monitoring. The Journal of Finance, 47: 1537–1555. doi: 10.1111/j.1540-6261.1992.tb04669.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
Studies suggest that underwriting syndicates provide marketing services and certify the fairness of offer prices. We argue that syndicate lead banks also monitor manager effort, increasing the value of capital-raising companies. A given level of monitoring is associated with a given level of intrinsic value, so there is a “schedule” of certifiable offer prices, depending on the level of monitoring. Monitoring, marketing, and certification are, therefore, all legitimate syndicate functions. New evidence supporting the conclusion that syndicates provide corporate monitoring is presented.