Do underwriters matter? The impact of the near failure of an equity underwriter

Anna Kovner

Journal of Financial Intermediation, 2012, vol. 21, issue 3, 507-529

Abstract: The financial crisis provides a natural experiment for testing theoretical predictions of the equity underwriter’s role following an initial public offering. Clients of Bear Stearns, Lehman Brothers, Merrill Lynch, and Wachovia saw their stock prices fall almost 5%, on average, on the day it appeared that these institutions might collapse. The decline was more than 1% lower than the abnormal return of other newly public companies, representing a loss in equity value of almost $3 billion. The price impact was worse for companies with fewer monitors, suggesting that underwriters play an important role in monitoring newly public companies. The abnormal return is more negative for clients that are also lending clients, but is not significantly associated with the role of the underwriter as market maker or counterparty to investors.

Keywords: Investment banking; Financial crisis; IPOs; Underwriting; Event study (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042957312000022
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:21:y:2012:i:3:p:507-529

DOI: 10.1016/j.jfi.2012.01.001

Access Statistics for this article

Journal of Financial Intermediation is currently edited by Elu von Thadden

More articles in Journal of Financial Intermediation from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).