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The effects of affiliations on the initial public offering pricing

Manuela Geranio, Camilla Mazzoli and Fabrizio Palmucci

International Review of Economics & Finance, 2017, vol. 51, issue C, 295-313

Abstract: This paper studies the impact of affiliations between lead managers, venture capitalists, and institutional investors on the Initial Public Offering (IPO) pricing. Using a sample of 1996 US IPOs issued between 1997 and 2010, we find that affiliations strongly and positively affect the offer price by improving the information production process. We also show that the underpricing is affected by affiliations because of conflicts of interest that exist between the players: when an institutional investor is affiliated with a lead manager or with a venture capitalist we observe nepotistic behavior in hot IPOs and dumping ground behavior in cold IPOs.

Keywords: Initial public offerings; Conflicts of interest; Underpricing; Information asymmetries; Price adjustment (search for similar items in EconPapers)
JEL-codes: G24 G31 G23 (search for similar items in EconPapers)
Date: 2017
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