The role of underwriter-investor relationships in the IPO process

    Authors

    M. M. Binay; V. A. Gatchev;C. A. Pirinsky

    Comments

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    Abbreviated Journal Title

    J. Financ. Quant. Anal.

    Keywords

    INITIAL PUBLIC OFFERINGS; ORDER BOOK; ALLOCATION; PERFORMANCE; INFORMATION; REPUTATION; ISSUERS; FIRMS; PRICE; Business, Finance; Economics

    Abstract

    We find that in allocating initial public offerings (IPOs), underwriters favor institutions they have previously worked with. Regular investors benefit more than casual investors in IPOs through greater participation in underpriced issues. Relationship participation is more important in the distribution of IPOs with stronger demand, TPOs of less liquid firms, and deals by less reputable underwriters. Overall, our results are consistent with book-building theories of IPOs. Interestingly, for 1999-2000 we find that regular investors receive even more underpriced IPOs relative to previous years while we do not find evidence that they provide additional services in IPOs.

    Journal Title

    Journal of Financial and Quantitative Analysis

    Volume

    42

    Issue/Number

    3

    Publication Date

    1-1-2007

    Document Type

    Article

    Language

    English

    First Page

    785

    Last Page

    809

    WOS Identifier

    WOS:000249257000010

    ISSN

    0022-1090

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