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Underwriter reputation and the underwriter–investor relationship in IPO markets

Suman Neupane () and Chandra Thapa

Journal of International Financial Markets, Institutions and Money, 2013, vol. 24, issue C, 105-126

Abstract: Using data from the unique setting of Indian IPOs, this study examines the underwriter–investor relationship based on underwriter reputation. We find that high reputation and low reputation underwriters have strong relationships with different sets of investors. While large institutional investors participate early in IPOs managed by high reputation underwriters, high net worth investors appear to do the same in IPOs managed by low reputation underwriters. The varying nature of relationships with investors also has important consequences for IPO pricing. Our analysis of the setting of the offer price shows that reputation matters greatly for high reputation underwriters. Low reputation underwriters, on the other hand, appear to price aggressively and set high offer prices even when institutional participation is negligible.

Keywords: Initial public offerings; Underwriter reputation; Investor–underwriter relationship; Institutional investors; Pricing discretion (search for similar items in EconPapers)
JEL-codes: G15 G24 (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1016/j.intfin.2012.11.005

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Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely

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