Pre-IPO banking relationships reduce firm's IPO underpricing by 17%.
The study looked at how relationships with banks before a company goes public affect the price of its initial public offering (IPO). By comparing data on banking relationships and IPO underpricing, the researchers found that firms with a pre-IPO banking relationship with an underwriter had 17% lower underpricing compared to firms without such relationships. This suggests that having a banking relationship before an IPO can help reduce the high cost of going public.