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Underwriter Reputation and Repetitive Public Offerings

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  • Carter, Richard B
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    Abstract

    A recent examination of underwriter reputation and initial public offerings (IPOs) suggest that one of the reasons prestigious underwriters market low-risk IPOs is to increase the expected present value of subsequent offerings. There is a greater likelihood that a firm using low-risk IPOs will be a viable future operation with the potential for subsequent offerings than a firm issuing high-risk IPOs. I examine the hypothesis that the likelihood of subsequent offerings is negatively related to IPO risk. In addition to finding support for this hypothesis, I show that the likelihood of subsequent offerings is positively related to the IPO underwriter's reputation and negatively related to the IPO gross spread. Finally, I find that the likelihood of firms switching IPO underwriters for subsequent offerings decreases with increasing IPO underwriter reputation.

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    Bibliographic Info

    Article provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.

    Volume (Year): 15 (1992)
    Issue (Month): 4 (Winter)
    Pages: 341-54

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    Handle: RePEc:bla:jfnres:v:15:y:1992:i:4:p:341-54

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0270-2592
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    Web page: http://www.southwesternfinance.org/
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    Web: http://www.blackwellpublishing.com/subs.asp?ref=0270-2592

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    Cited by:
    1. Kenneth A. Carow & Edward J. Kane, 2001. "Event-Study Evidence of the Value of Relaxing Longstanding Regulatory Restraints on Banks, 1970-2000," NBER Working Papers 8594, National Bureau of Economic Research, Inc.
    2. Numata, Shingo & Takeda, Fumiko, 2010. "Stock market reactions to audit failure in Japan: The case of Kanebo and ChuoAoyama," The International Journal of Accounting, Elsevier, vol. 45(2), pages 175-199, June.
    3. Spiess, D. Katherine & Affleck-Graves, John, 1995. "Underperformance in long-run stock returns following seasoned equity offerings," Journal of Financial Economics, Elsevier, vol. 38(3), pages 243-267, July.
    4. Mathew, Prem G., 2002. "Long-horizon seasoned equity offerings performance in Pacific Rim markets," Review of Financial Economics, Elsevier, vol. 11(4), pages 317-333.
    5. Cai, Jun & Loughran, Tim, 1998. "The performance of Japanese seasoned equity offerings, 1971-1992," Pacific-Basin Finance Journal, Elsevier, vol. 6(5), pages 395-425, November.

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