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The Relationship between IPO Underpricing Phenomenon & the Underwriter’s Reputation

Author

Listed:
  • Satyendra Kumar Sharma

    () (Faculty BITS Pilani, India)

  • Ankit Seraphim

    () (Faculty BITS Pilani, India)

Abstract

The primary focus is on studying the under pricing phenomenon in Indian IPO markets. The paper examines the link between the reputation of underwriters to an IPO issue & the level of under pricing of that issue. The underwriters of high reputation have a pricing behavior which is distinct from underwriters in other markets. The investment banks are compared on the basis of the number of issues managed; deal value, syndicate size etc & the top banks were found to under price less as compared to their lower ranked counterparts. The post listing returns are directly related to the number of times the IPO issue is oversubscribed. The study is based on Indian IPO offerings.

Suggested Citation

  • Satyendra Kumar Sharma & Ankit Seraphim, 2010. "The Relationship between IPO Underpricing Phenomenon & the Underwriter’s Reputation," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 13(38), pages 181-209, December.
  • Handle: RePEc:rej:journl:v:13:y:2010:i:38:p:181-209
    as

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    References listed on IDEAS

    as
    1. Tinic, Seha M, 1988. " Anatomy of Initial Public Offerings of Common Stock," Journal of Finance, American Finance Association, vol. 43(4), pages 789-822, September.
    2. Neuberger, Brian M. & Hammond, Carl T., 1974. "A Study of Underwriters' Experience With Unseasoned New Issues," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 9(02), pages 165-177, March.
    3. Stoughton, Neal M. & Zechner, Josef, 1998. "IPO-mechanisms, monitoring and ownership structure," Journal of Financial Economics, Elsevier, vol. 49(1), pages 45-77, July.
    4. Tim Loughran & Jay Ritter, 2004. "Why Has IPO Underpricing Changed Over Time?," Financial Management, Financial Management Association, vol. 33(3), Fall.
    5. Beatty, Randolph P. & Ritter, Jay R., 1986. "Investment banking, reputation, and the underpricing of initial public offerings," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 213-232.
    6. Kirkulak, Berna & Davis, Colin, 2005. "Underwriter reputation and underpricing: Evidence from the Japanese IPO market," Pacific-Basin Finance Journal, Elsevier, vol. 13(4), pages 451-470, September.
    7. Slovin, Myron B. & Sushka, Marie E. & Hudson, Carl D., 1990. "External monitoring and its effect on seasoned common stock issues," Journal of Accounting and Economics, Elsevier, vol. 12(4), pages 397-417, March.
    8. Ruud, Judith S., 1993. "Underwriter price support and the IPO underpricing puzzle," Journal of Financial Economics, Elsevier, vol. 34(2), pages 135-151, October.
    9. Rock, Kevin, 1986. "Why new issues are underpriced," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 187-212.
    10. Yoram Barzel, 2006. "Prevention Is Better than Cure: The Role of IPO Syndicates in Precluding Information Acquisition," The Journal of Business, University of Chicago Press, vol. 79(6), pages 2911-2924, November.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    IPO; Post Issue Promoter Holding(PIPH); Offer size; Syndicate size; Underpricing; Underwriters; List price; Issue price; Lead managers; Price band; Age of firm; Investment Bank Prestige; Oversubscription;

    JEL classification:

    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General

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