Syndicate structure and IPO outcomes: The impact of underwriter roles and syndicate concentration

Craig G. Dunbar and Michael King

Journal of Corporate Finance, 2023, vol. 79, issue C

Abstract: We examine how the composition and concentration of the underwriting syndicate affects outcomes in U.S. initial public offerings (IPOs) from 2002 to 2020. Most IPOs now feature “phantom” lead managers who underwrite significantly fewer shares than the lead-left bookrunner. We hypothesize that the phantom lead is the result of bargaining between issuers wanting greater information production and lead-left bookrunners preferring greater control of the IPO. Larger, less concentrated IPO syndicates feature more absolute price adjustments from the filing price during bookbuilding with downward revisions on average, and more analyst following post-IPO. The magnitude of price adjustments is greater when adding active joint leads relative to passive phantom leads. More concentrated IPOs feature higher first-day returns following positive price adjustments. Adding lead managers reduces the likelihood the lead-left will retain that role in follow-on equity offerings.

Keywords: Initial public offerings; Underwriters; Syndicate structure; Price adjustment; First-day returns; Underwriting spread; Equity analysts; Seasoned equity offerings (search for similar items in EconPapers)
JEL-codes: C22 G24 G32 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:79:y:2023:i:c:s0929119923000317

DOI: 10.1016/j.jcorpfin.2023.102382

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