Factors affecting investment bank initial public offering market share

Dunbar, Craig G.

doi:10.1016/s0304-405x(99)00043-4

Cited by 274 publications

(128 citation statements)

References 37 publications

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“…Dunbar (2000) presents evidence that underwriters in 1984-1994 subsequently increased their IPO market share if they had an analyst who was highly ranked in the Institutional Investor (II) annual survey. Clarke, Dunbar, and Kahle (2003, Table 2) report that investment banks gaining an II all-star analyst subsequently boosted their market share of IPOs in the analyst's industry; the changes were greater in 1995-1999than in 1988-1994.…”

Section: B the Analyst Lust Explanation Of Underpricingmentioning

confidence: 99%

Why Has IPO Underpricing Changed Over Time?

2002

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In the 1980s, the average first-day return on initial public offerings (IPOs) was 7%. The average first-day return doubled to almost 15% during 1990-1998, before What explains the severe underpricing of initial public offerings in 1999-2000, when the average first-day return of 65% exceeded any level previously seen before? In this article, we address this and the related question of why IPO underpricing doubled from 7% during 1980-1989 to almost 15% during 1990-1998 before reverting to 12% during the post-bubble period of 2001-2003. Our goal is to explain low-frequency movements in underpricing (or first-day returns) that occur less often than hot and cold issue markets.We examine three hypotheses for the change in underpricing: 1) the changing risk composition hypothesis, 2) the realignment of incentives hypothesis, and 3) a new hypothesis, the changing issuer objective function hypothesis. The changing issuer objective function hypothesis has two components, the spinning hypothesis and the analyst lust hypothesis.The changing risk composition hypothesis, introduced by Ritter (1984), assumes that riskier IPOs will be underpriced by more than less-risky IPOs. This prediction follows from models where underpricing arises as an equilibrium condition to induce investors to participate in the IPO market. If the proportion of IPOs that represent risky stocks increases, there should be greater average underpricing. Risk can reflect either technological or valuation uncertainty. Although there have been some changes in the characteristics of firms going public, these changes are found to be too minor to explain much of the variation in underpricing over time if there is a stationary risk-return relation.The realignment of incentives and the changing issuer objective function hypotheses bothWe thank Hsuan

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Section: B the Analyst Lust Explanation Of Underpricingmentioning

confidence: 99%

Why Has IPO Underpricing Changed Over Time?

2002

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“…During equity offerings, research analysts could play an important role of certifying to potential investors that the shares being issued are appropriately priced (e.g., Dunbar (2000)). …”

Section: Optimism Hypothesismentioning

confidence: 99%

The Global Settlement, All-Star Analyst Departures and Their Impact on the Capital Markets

Mahaney-Walter

2015

SSRN Journal

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The Global Research Analyst Settlement prohibited twelve large investment banks from tying equity analysts' compensation to investment banking revenues, causing a large number of Institutional Investor "all-star" analysts to exit the sell-side industry. Using a difference-in-differences specification, I find that the departure of all-stars caused their bank-industry underwriting groups to lose equity issuance market share. Market share losses were more severe for IPOs than for IPOs and follow-on underwritings combined. The higher the average quality of all-stars in a bank-industry, the more severe were the bank-industry's losses. Additionally, the departure of all-stars raised the cost of equity capital for IPOs underwritten by their bank-industry groups, particularly for IPOs that were more difficult to value. Ultimately, the loss of sell-side research talent, an unintended consequence of regulation, forced issuers to accept research coverage of inferior quality, raising the cost of obtaining public capital. Degree Type DissertationDegree Name

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“…Dunbar (2000) and Chen et al (2001) suggest that large forecast errors will damage underwriter reputation and so there is clear incentive to closely monitor the profit forecasts. The commentators support that, principally, bankers and underwriters add credibility to companies when raising capital.…”

Section: Determinants Of Earnings Forecastsmentioning

confidence: 99%

Associations Between Management Forecast Accuracy and Pricing of IPOs in Athens Stock Exchange

Gounopoulos

2011

MFJ

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This study examines the earnings forecast accuracy of newly listed companies on the Athens Stock Exchange and further investigates the relationship between earnings forecast and pricing of IPOs. It uses a unique data set of 208 IPOs, which were floated during the period of January 1994 to December 2001 in the Athens Stock Exchange. The results suggest that investors are able to anticipate forecast errors at the time of listing. Pricing of IPOs indicate that firms with negative earnings forecast (pessimistic) are associated with low level of underpricing while optimistic management earning forecast can be a signal for high initial returns. Three variables -age of the IPOs, ownership by insiders and industry classification significantly contribute towards accuracy of earnings forecast.

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Factors affecting investment bank initial public offering market share

Cited by 274 publications

References 37 publications

Why Has IPO Underpricing Changed Over Time?

Why Has IPO Underpricing Changed Over Time?

The Global Settlement, All-Star Analyst Departures and Their Impact on the Capital Markets

Associations Between Management Forecast Accuracy and Pricing of IPOs in Athens Stock Exchange

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