Relationship banking and conflicts of interest: Evidence from German initial public offerings

Peter Klein, Robert Wuebker and Kathrin Zoeller

Journal of Corporate Finance, 2016, vol. 39, issue C, 210-221

Abstract: This paper investigates conflicts of interest associated with relationship banking. Using a sample of 270 German initial public offerings (IPOs), we ask if universal-bank-underwritten IPOs perform differently from IPOs underwritten by specialized investment banks. We find that universal-bank affiliation is correlated with higher first-day returns (underpricing) but uncorrelated with long-term performance, suggesting that underpricing compensates for potential conflicts of interest. Our results also suggest that preexisting bank relationships, rather than issuer characteristics, may determine underwriter choice.

Keywords: Universal banking; Relationship banking; Initial public offering; Underpricing (search for similar items in EconPapers)
JEL-codes: G21 G24 G32 G34 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:39:y:2016:i:c:p:210-221

DOI: 10.1016/j.jcorpfin.2016.03.010

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