Business, Management and Accounting
8 years ago

Underwriters favor institutions they know, leaving casual investors behind in IPOs.

Journal of Financial and Quantitative Analysis
The Role of Underwriter-Investor Relationships in the IPO Process
Murat Binay, Vladimir A. Gatchev, Christo A. Pirinsky

Paper Summary

Related papers

Business, Management and Accounting
2 years ago

Prestigious underwriters drive IPO underpricing and offer discounted shares.

Venture Capital
Corporate Governance
Entrepreneurship
2 views
Business, Management and Accounting
4 years ago

VC-backed IPOs with all-star analyst coverage significantly underpriced, benefiting investors.

Corporate Governance
Venture Capital
Banking Finance
2 views
Business, Management and Accounting
6 years ago

Reputed underwriters boost IPO performance in global markets, study finds.

Corporate Governance
Venture Capital
Asset Pricing
1 view

Underwriters tend to favor institutions they have worked with before when allocating IPOs. Regular investors benefit more than casual investors in IPOs by getting more underpriced shares. This relationship is especially important for IPOs with high demand, less liquid firms, and deals by less reputable underwriters. The results support the idea that IPOs are distributed through book-building. Interestingly, regular investors received even more underpriced IPOs in 1999-2000 compared to previous years, without providing extra services.