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. Copyright 2004 by The American Finance Association.
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Volume (Year): 59 (2004) Issue (Month): 6 (December) Pages: 2903-2958 Download reference. The following formats are available: HTML
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