Work

The Effect of Banking Relationships on the Firm's IPO Underpricing

Year: 2004

Type: article

Abstract: ABSTRACT This paper investigates the effects of pre‐IPO banking relationships on a firm's IPO. Using a new and unique data set, which compares the firm's pre‐IPO banking relationships to the underwriters managing the firm's new issue, I test whether banking relationships established before the firm's IPO ameliorate asymmetric informa tion problems behind high IPO underpricing. The results show that firms with a pre‐IPO banking relationship with a prospective underwriter face about 17% lower underpricing than firms without such banking relationships. These results are robust to controlling for the firm's endogenous selection of the pre‐IPO banking institution.

Source: The Journal of Finance

DOI: 10.1111/j.1540-6261.2004.00720.x

Author: CAROLA SCHENONE

Institutions: University of Minnesota, Federal Reserve, University of Wisconsin–Madison, Federal Reserve Bank of New York, Carnegie Mellon University, University of Amsterdam

Language: English

Topic: Corporate Finance and Governance

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2003476310

FWCI: 18.95

Cites: 60

Cited by: 261

Related to: 8