Underwriting syndicate structure and foreign IPO underpricing: A team production perspective

Wenhui Huang, Zhihan Shen, Yu Lin and Ruocheng Zhao

International Review of Financial Analysis, 2024, vol. 96, issue PA

Abstract: Grounded in team production and agency theory, we investigate investment bank opportunism in the context of 466 foreign initial public offerings (IPOs) in U.S. equity markets from 2009 to 2023. Findings reveal that IPO underpricing is higher for foreign firms underwritten by larger and more diverse syndicates owing to concerns about free-riding and moral hazard. Our results are robust to a series of sensitivity tests. Moreover, frequent foreign IPOs by home-country firms and strong home-country legal protection for investors attenuate the positive relationship between underwriting syndicate size and diversity and IPO underpricing. By delineating the collaborative nature of IPO underwriting, this study offers new insights into the implications of syndicate structure for foreign IPO performance.

Keywords: Syndicate; IPO underpricing; Teamwork; Underwriter; Opportunism (search for similar items in EconPapers)
JEL-codes: F23 G32 G34 M14 M16 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:96:y:2024:i:pa:s1057521924005726

DOI: 10.1016/j.irfa.2024.103640

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