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The role of expertise in syndicate formation
Journal of Economics & Management Strategy ( IF 2.245 ) Pub Date : 2021-07-27 , DOI: 10.1111/jems.12444
Sylvain Bourjade 1
Affiliation  

In most initial public offerings around the world, an underwriter selects syndicate members and uses their information to set the offering price. The objective of this paper is to develop a model of the “book building” process in which the formation of the syndicate is an endogenous decision variable. I analyze when it may benefit the lead underwriter to select syndicate members with different expertise and to acquire all available information about the value of the shares. I show that the underwriter faces a tradeoff between the cost of extracting information and valuation accuracy. Specifically, when the issuer is a low-risk firm, the costs of acquiring information are higher than the benefits in terms of price accuracy and forming a specialized syndicate is optimal. However, when retail investors' participation is high enough and when the issuer is a high-risk and transparent firm, the lead underwriter' optimal strategy is to form a diversified syndicate.

中文翻译:

专业知识在辛迪加组建中的作用

在世界各地的大多数首次公开募股中,承销商选择辛迪加成员并使用他们的信息来设定发行价格。本文的目的是开发一个“簿记建设”过程模型,其中辛迪加的形成是一个内生决策变量。我分析了主承销商选择具有不同专业知识的财团成员并获取有关股票价值的所有可用信息何时可能对主承销商有利。我表明承销商面临着提取信息的成本和估值准确性之间的权衡。具体而言,当发行人是低风险公司时,获取信息的成本高于价格准确性方面的收益,形成专门的辛迪加是最优的。然而,当散户投资者
更新日期:2021-07-27
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