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Multiple lead underwriting syndicate and IPO pricing

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  • Vithanage, Kulunu
  • Neupane, Suman
  • Chung, Richard

Abstract

This paper examines the role of multiple lead underwriters (MLUs) in pricing initial public offerings (IPOs) by considering certification and market power hypotheses. Consistent with the notion that MLUs provide certification to the issue, we find that IPOs backed by MLUs price the offer closer to the intrinsic value of the firm than firms backed by single lead underwriters. Our results also indicate that IPOs led by MLUs experience lower initial return, lower variability of initial returns and better long-run performance. The results are robust to self-selection and omitted variable biases. MLU led offerings also exhibit a lower risk of withdrawal and are more likely to conduct a larger secondary equity offering.

Suggested Citation

  • Vithanage, Kulunu & Neupane, Suman & Chung, Richard, 2016. "Multiple lead underwriting syndicate and IPO pricing," International Review of Financial Analysis, Elsevier, vol. 48(C), pages 193-208.
    • Handle: RePEc:eee:finana:v:48:y:2016:i:c:p:193-208
    DOI: 10.1016/j.irfa.2016.10.001
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    4. Carbó-Valverde, Santiago & Cuadros-Solas, Pedro J. & Rodríguez-Fernández, Francisco, 2021. "The impact of lending relationships on the choice and structure of bond underwriting syndicates," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 74(C).
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    6. Zhang, Zikai & Neupane, Suman, 2024. "Global IPO underpricing during the Covid-19 pandemic: The impact of firm fundamentals, financial intermediaries, and global factors," International Review of Financial Analysis, Elsevier, vol. 91(C).
    7. Milsom, Luke & Pažitka, Vladimír & Roland, Isabelle & Wójcik, Dariusz, 2023. "The gravity of syndication ties in international equity underwriting," Bank of England working papers 1021, Bank of England.

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