Comovement and investment banking networks

Gustavo Grullon, Shane Underwood and James P. Weston

Journal of Financial Economics, 2014, vol. 113, issue 1, 73-89

Abstract: We test the hypothesis that investment banking networks affect stock prices and trading behavior. Consistent with the notion that investment banks serve as information hubs for segmented groups of investors, the stock prices of firms that use the same lead underwriter during their equity offerings tend to move together. We also find that when firms switch underwriters between their initial public offering (IPO) and a seasoned equity offering (SEO), they comove less with the stocks associated with the old bank and more with the stocks associated with the new bank. This change in comovement is greater for stocks completing their first SEO and for those experiencing large changes in institutional ownership.

Keywords: Investment banking; Networks; Seasoned equity offering; Trading (search for similar items in EconPapers)
JEL-codes: G11 G14 G24 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:113:y:2014:i:1:p:73-89

DOI: 10.1016/j.jfineco.2014.02.010

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