Business, Management and Accounting
5 years ago

Reputable underwriters lead to lower IPO costs in Indonesia.

International Journal of Economic Policy in Emerging Economies
The Lead Underwriter Reputation and Underpricing: Study of Company’s IPO in Indonesia
Irwan Trinugroho, Wahyu Widarjo, Bandi N.A.

Paper Summary

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Lead underwriter reputation affects underpricing in IPOs in Indonesia. Companies with reputable underwriters have lower underpricing. A study of 163 IPOs from 2010 to 2017 shows that underwriter reputation has a significant negative impact on underpricing. This means choosing a reputable underwriter can help reduce the cost of capital for companies during IPOs. Higher underpricing leads to higher capital costs, affecting the funds raised by the firm. Consider underwriter reputation when selecting an underwriter for an IPO.