 Prior banking relationships and long-term IPO performanceKam C. Chan and Guangzi Li International Review of Economics & Finance, 2022, vol. 77, issue C, 123-134 Abstract: Using a unique dataset of loan information disclosed in Chinese firms' initial public offering (IPO) prospectuses, we investigate how prior banking relationships affect the long-term performance of IPOs. The findings suggest that when an IPO firm has a pre-IPO relationship with a bank that includes larger loans or greater loan spreads, its long-term performance is higher. Specifically, we find a 1% increase in the average loan-to-asset ratio (average loan spread) will result in a 1.32% (10.22%) increase in the three-year post-IPO stock return. Additional analysis suggests that firms with higher average loan-to-asset ratios and loan spreads have, on average, higher combined three-years post-IPO asset growth, debt growth, sales growth, and net income growth. Collectively, we show that a bank's knowledge of loan information as a result of a banking relationship that existed prior to the IPO has a material impact on the performance of new firms, which is consistent with the interpretation that bank monitoring has a positive role in firm value. Keywords: IPO; Loan ratio; Loan spread; Bank monitoring; Performance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:77:y:2022:i:c:p:123-134 DOI: 10.1016/j.iref.2021.09.005 Access Statistics for this article International Review of Economics & Finance is currently edited by H. Beladi and C. Chen More articles in International Review of Economics & Finance from Elsevier |
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