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The Certification Role of pre-IPO Banking Relationships: Evidence from IPO Underpricing in Japan

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  • Yoshiaki Ogura

    (Waseda University)

Abstract

We find empirical evidence that pre-initial public offering (IPO) relationships with commercial banks through lending and investment via their venture capital subsidiaries significantly reduce IPO underpricing in Japan. This findings suggest that a pre-IPO banking relationship certifies the low risk of an IPO firm. Given the fact that institutional investors are a minority in the allocation of IPO stocks in Japan, this effect is expected to come mainly from reducing either the investors’ winner’s curse or the signaling incentive of IPO firms, rather than from the reduction in information rent for institutional investors participating in the book-building process.

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  • Yoshiaki Ogura, 2017. "The Certification Role of pre-IPO Banking Relationships: Evidence from IPO Underpricing in Japan," The Japanese Economic Review, Springer, vol. 68(2), pages 257-278, June.
    • Handle: RePEc:spr:jecrev:v:68:y:2017:i:2:d:10.1111_jere.12082
    DOI: 10.1111/jere.12082
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    3. Honjo, Yuji & Kwak, Charee & Uchida, Hirofumi, 2022. "Initial funding and founders’ human capital: An empirical analysis using multiple surveys for start-up firms," Japan and the World Economy, Elsevier, vol. 63(C).

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    More about this item

    Keywords

    G21; L14; D82;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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