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Multiple lead underwriting syndicate and IPO pricing

Kulunu Vithanage, Suman Neupane () and Richard Chung

International Review of Financial Analysis, 2016, vol. 48, issue C, 193-208

Abstract: This paper examines the role of multiple lead underwriters (MLUs) in pricing initial public offerings (IPOs) by considering certification and market power hypotheses. Consistent with the notion that MLUs provide certification to the issue, we find that IPOs backed by MLUs price the offer closer to the intrinsic value of the firm than firms backed by single lead underwriters. Our results also indicate that IPOs led by MLUs experience lower initial return, lower variability of initial returns and better long-run performance. The results are robust to self-selection and omitted variable biases. MLU led offerings also exhibit a lower risk of withdrawal and are more likely to conduct a larger secondary equity offering.

Keywords: IPOs; Multiple lead underwriters; Syndicates; Pricing; Certification (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1016/j.irfa.2016.10.001

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