Underwriter Reputation and the Underwriter–Investor Relationship in IPO Markets

Posted: 9 Nov 2017

See all articles by Suman Neupane

Suman Neupane

Griffith University - Department of Accounting, Finance and Economics

Chandra Thapa

University of Strathclyde - Department of Accounting and Finance

Date Written: March 7, 2013

Abstract

Using data from the unique setting of Indian IPOs, this study examines the underwriter–investor relationship based on underwriter reputation. We find that high reputation and low reputation underwriters have strong relationships with different sets of investors. While large institutional investors participate early in IPOs managed by high reputation underwriters, high net worth investors appear to do the same in IPOs managed by low reputation underwriters. The varying nature of relationships with investors also has important consequences for IPO pricing. Our analysis of the setting of the offer price shows that reputation matters greatly for high reputation underwriters. Low reputation underwriters, on the other hand, appear to price aggressively and set high offer prices even when institutional participation is negligible.

Keywords: Initial public offerings, Underwriter reputation, Investor–underwriter relationship, Institutional investors, Pricing discretion

JEL Classification: G15, G24

Suggested Citation

Neupane, Suman and Thapa, Chandra, Underwriter Reputation and the Underwriter–Investor Relationship in IPO Markets (March 7, 2013). Journal of International Financial Markets, Institutions and Money, Vol. 24, 2013, Available at SSRN: https://ssrn.com/abstract=3066662

Suman Neupane (Contact Author)

Griffith University - Department of Accounting, Finance and Economics ( email )

170 Kessels Road
Nathan, Queensland 4111
Australia

Chandra Thapa

University of Strathclyde - Department of Accounting and Finance ( email )

Curran Building
100 Cathedral Street
Glasgow G4 0LN
United Kingdom

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