Syndicate Size, Structure and Performance: An Empirical Investigation of Indian IPOs

Abstract

The study investigates the syndicates for 154 Initial Public Offerings (IPOs) issued during the period 2002-07. The findings indicate that the syndicate size is significantly influenced by the prestige of the investment banks, initial day return, leverage, offer size, and ex ante uncertainty. The variables market-adjusted initial return and leverage ratio show an inverse association with the magnitude of the syndicate, while the prestige of the lead bank, offer size, and ex ante uncertainty positively influence the syndicate size. Among the chosen variables, it is found that offer size, followed by the prestige of the top-rated bank and initial day return are relatively more superior in estimating the syndicate size. Further, the differences in the syndicate size across underpricing of IPOs are found statistically significant, explaining that syndicate structure helps in reducing underpricing and thus in improving the pricing accuracy. Over the sample period, syndicate structure is not uniform across the operational history of the firm, suggesting that the younger firms design a larger syndicate compared to the matured firms.