The Effects of Banking Relationship, Private Equity and Lead Managers on the Performance of West African IPO Firms

Abstract

This paper examines the performance effects arising from IPO firms retaining their existing bank as a lead manager together with the effects of foreign and domestic lead managers, corporate insiders and private equity investors across West Africa. Using a unique and comprehensive sample of 37 locally listed IPO firm’s from across West Africa I find considerable differences between listings in civil and common law markets. Furthermore I find considerable evidence of the benefits from retained block-shareholder ownership as a governance mechanism in legal systems characterised by weaker investor protection and substantial benefits from the employment of foreign lead managers over and above their domestic counterparts.

Keywords: IPO, Underpricing, Cost of Equity, West Africa, Agency Theory