Underwriter reputation and underpricing: evidence from the Australian IPO market

Underwriter reputation and underpricing: evidence from the Australian IPO market Dimovski and Brooks (J Intern Financ Mark Inst Money 14:267–280, 2004b) examined 358 Australian industrial and mining company initial public offerings (IPOs) from 1994 to 1999 to report that more money was left on the table by IPOs that engaged underwriters than those that did not engage underwriters. Loughran and Ritter (Autumn 5–37, 2004) suggested that the negative relation between underwriter reputation and underpricing has reversed in the 1990s with U.S. IPOs. The main purpose of this paper is to study the relationship between underwriter reputation and underpricing in terms of Australian IPO data. In this paper, we use 380 Australian industrial company IPOs from 1994 to 2004 to perform the empirical study. Our results suggest that more prestigious underwriters are associated with a higher level of underpricing. Other variables that are found to be significant in explaining the level of IPO underpricing are market sentiment, share options, total capital raised and underwriter options. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Underwriter reputation and underpricing: evidence from the Australian IPO market

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Publisher
Springer Journals
Copyright
Copyright © 2010 by Springer Science+Business Media, LLC
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-010-0211-2
Publisher site
See Article on Publisher Site

Abstract

Dimovski and Brooks (J Intern Financ Mark Inst Money 14:267–280, 2004b) examined 358 Australian industrial and mining company initial public offerings (IPOs) from 1994 to 1999 to report that more money was left on the table by IPOs that engaged underwriters than those that did not engage underwriters. Loughran and Ritter (Autumn 5–37, 2004) suggested that the negative relation between underwriter reputation and underpricing has reversed in the 1990s with U.S. IPOs. The main purpose of this paper is to study the relationship between underwriter reputation and underpricing in terms of Australian IPO data. In this paper, we use 380 Australian industrial company IPOs from 1994 to 2004 to perform the empirical study. Our results suggest that more prestigious underwriters are associated with a higher level of underpricing. Other variables that are found to be significant in explaining the level of IPO underpricing are market sentiment, share options, total capital raised and underwriter options.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Oct 13, 2010

References

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