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The effects of affiliations on the initial public offering pricing

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  • Geranio, Manuela
  • Mazzoli, Camilla
  • Palmucci, Fabrizio

Abstract

This paper studies the impact of affiliations between lead managers, venture capitalists, and institutional investors on the Initial Public Offering (IPO) pricing. Using a sample of 1996 US IPOs issued between 1997 and 2010, we find that affiliations strongly and positively affect the offer price by improving the information production process. We also show that the underpricing is affected by affiliations because of conflicts of interest that exist between the players: when an institutional investor is affiliated with a lead manager or with a venture capitalist we observe nepotistic behavior in hot IPOs and dumping ground behavior in cold IPOs.

Suggested Citation

  • Geranio, Manuela & Mazzoli, Camilla & Palmucci, Fabrizio, 2017. "The effects of affiliations on the initial public offering pricing," International Review of Economics & Finance, Elsevier, vol. 51(C), pages 295-313.
    • Handle: RePEc:eee:reveco:v:51:y:2017:i:c:p:295-313
    DOI: 10.1016/j.iref.2017.06.002
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    Cited by:

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    More about this item

    Keywords

    Initial public offerings; Conflicts of interest; Underpricing; Information asymmetries; Price adjustment;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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