The Effect of Banking Relationships on the Firm's IPO Underpricing
AbstractThis 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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Bibliographic InfoArticle provided by American Finance Association in its journal The Journal of Finance.
Volume (Year): 59 (2004)
Issue (Month): 6 (December)
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