The Underwriter Persistence Phenomenon
AbstractThis study presents new evidence that initial IPO returns have persistent underwriter-specific components. These components cannot be explained by existing measures of underwriter quality, underwriter service, or controls for several known predictors of initial IPO returns. Tests that trace the roots of persistence most broadly support theories of asymmetric information among underwriters. I present such a model, and consistent with its predictions, I find that high underpricing underwriters (1) are responsible for a majority of the partial adjustment phenomenon, (2) make more informed analyst revisions, (3) experience superior market share growth, and (4) are more likely to serve an institutional clientele. Copyright 2007 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): 62 (2007)
Issue (Month): 3 (06)
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- Mantecon, Tomas & Poon, Percy, 2009. "An analysis of the liquidity benefits provided by secondary markets," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 335-346, February.
- Liu, Xiaoding & Ritter, Jay R., 2011. "Local underwriter oligopolies and IPO underpricing," Journal of Financial Economics, Elsevier, vol. 102(3), pages 579-601.
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- Agathee, Ushad Subadar & Sannassee, Raja Vinesh & Brooks, Chris, 2012. "The underpricing of IPOs on the Stock Exchange of Mauritius," Research in International Business and Finance, Elsevier, vol. 26(2), pages 281-303.
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