Review of Quantitative Finance and Accounting

, Volume 38, Issue 1, pp 61–86 | Cite as

Underwriter syndication and corporate governance

  • Hoje Jo
  • Yongtae Kim
  • Dongsoo Shin
Original Research


The main purpose of this paper is to examine underwriters’ response to issuers’ ineffective corporate governance. Given the growing importance of corporate governance for the success of equity offerings, we examine this response using a sample of seasoned equity offerings (SEOs). Previous studies suggest various rationales behind underwriter syndication, such as risk sharing, market-making, information production, certification, and monitoring. We offer an information-asymmetry-reduction hypothesis for the persistence of underwriter syndication. We argue that less effective corporate governance decreases information credibility, which, in turn, increases information asymmetry, leading underwriters to increase syndicate size to mitigate subsequent agency problems. Consistent with this prediction, we find that the size of the underwriter syndication is inversely related to proxies that measure the effectiveness of corporate governance. Results remain robust even after controlling for other confounding factors.


Underwriting syndicate Corporate governance Seasoned equity offerings 

JEL Classification

G14 G24 G32 M41 



We appreciate an anonymous referee for providing valuable comments, as well as Fabio Caldiero, Robert Collins, Sanjiv Das, Paul Hanouna, Robert Hendershott, Helen Popper, Meir Statman, and William Sundstrom for their helpful comments and discussions. John Lee and Donna Maurer provided editorial assistance. Jo acknowledges financial support from the Dean Witter Foundation. Kim acknowledges support from the Accounting Development Fund of Santa Clara University. Shin acknowledges financial support from the Presidential Research Grants of Santa Clara University.


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Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  1. 1.Department of Finance, Leavey School of BusinessSanta Clara UniversitySanta ClaraUSA
  2. 2.Department of Accounting, Leavey School of BusinessSanta Clara UniversitySanta ClaraUSA
  3. 3.Department of Economics, Leavey School of BusinessSanta Clara UniversitySanta ClaraUSA

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