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Keywords:

  • initial public offering;
  • placement risk;
  • co-manager;
  • underwriter;
  • pre-market;
  • book building
  • G24;
  • G32

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.