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The role of a long-term investor-underwriter relationship in auctioned IPOs

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  • Jiang, Ping
  • Shao, Xinjian
  • Xue, Yi

Abstract

Using a unique, manually collected bidding dataset in China, we investigate the role of a long-term investor–underwriter relationship in auctioned initial public offerings (IPO). We find that a long-term investor–underwriter relationship helped improve the efficiency of an auction as a mechanism of IPOs. First, the relationship improved investors’ participation in IPOs and reduced participation uncertainty. Second, it mitigated the free riding problem. Third, it motivated investors to produce more accurate information. Finally, we identify the potential benefit of a long-term investor–underwriter relationship.

Suggested Citation

  • Jiang, Ping & Shao, Xinjian & Xue, Yi, 2022. "The role of a long-term investor-underwriter relationship in auctioned IPOs," Journal of Banking & Finance, Elsevier, vol. 135(C).
    • Handle: RePEc:eee:jbfina:v:135:y:2022:i:c:s0378426621003484
    DOI: 10.1016/j.jbankfin.2021.106397
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    Cited by:

    1. Chi, Yeguang & He, Jingbin & Ma, Xinru & Wu, Fei, 2023. "Institutional investor inattention bias in auctioned IPOs," Journal of Banking & Finance, Elsevier, vol. 150(C).
    2. Xuan, Ziyue & Guo, Wenting & Lan, Faqin, 2023. "Underwriters interest binding and IPO underpricing," Finance Research Letters, Elsevier, vol. 57(C).
    3. Wenjun Wang, 2024. "You scratch my back and i scratch yours: evidence from relationship-based bidding in IPO auctions," Review of Quantitative Finance and Accounting, Springer, vol. 62(4), pages 1593-1613, May.

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    More about this item

    Keywords

    Auctioned IPO; Long-term investor–underwriter relationship; Allocation right; Relation investors; Frequent investors;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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