IDEAS home Printed from https://ideas.repec.org/a/eee/jbrese/v163y2023ics0148296323002862.html
   My bibliography  Save this article

Success begets success! Exploring the carry-over effects of total underwriting effort on post-IPO issuer firm outcomes

Author

Listed:
  • Cheng, Louis T.W.
  • Sharma, Piyush
  • Yan, Siyuan

Abstract

Past research on initial public offers (IPO) marketing highlights the positive impact of underwriters’ efforts on the post-IPO marketing and financial outcomes for the IPO issuer firms but the exact mechanism underlying these ‘carry-over’ effects is still not clear. We address this important research gap by exploring the impact of total underwriting effort (i.e., combined efforts by underwriters and other players involved in IPO issuance) on the issuer firms’ post-IPO performance and the mediating role of IPO issuer satisfaction in this process. We test all the hypotheses using data from the China Stock Market and Accounting Research (CSMAR) database on 2,013 IPOs listed on Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE). Our findings provide a holistic view of the complex marketing forces that drive the total underwriting effort on the IPO issuer firms’ post-IPO performance, and the focal role played by IPO issuer satisfaction in this process.

Suggested Citation

  • Cheng, Louis T.W. & Sharma, Piyush & Yan, Siyuan, 2023. "Success begets success! Exploring the carry-over effects of total underwriting effort on post-IPO issuer firm outcomes," Journal of Business Research, Elsevier, vol. 163(C).
    • Handle: RePEc:eee:jbrese:v:163:y:2023:i:c:s0148296323002862
    DOI: 10.1016/j.jbusres.2023.113928
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0148296323002862
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jbusres.2023.113928?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Alexander Ljungqvist & Vikram Nanda & Rajdeep Singh, 2006. "Hot Markets, Investor Sentiment, and IPO Pricing," The Journal of Business, University of Chicago Press, vol. 79(4), pages 1667-1702, July.
    2. Bajo, Emanuele & Raimondo, Carlo, 2017. "Media sentiment and IPO underpricing," Journal of Corporate Finance, Elsevier, vol. 46(C), pages 139-153.
    3. Carter, Richard B & Manaster, Steven, 1990. "Initial Public Offerings and Underwriter Reputation," Journal of Finance, American Finance Association, vol. 45(4), pages 1045-1067, September.
    4. Francesca Cornelli & David Goldreich, 2003. "Bookbuilding: How Informative Is the Order Book?," Journal of Finance, American Finance Association, vol. 58(4), pages 1415-1443, August.
    5. Francesca Cornelli & David Goldreich, 2001. "Bookbuilding and Strategic Allocation," Journal of Finance, American Finance Association, vol. 56(6), pages 2337-2369, December.
    6. Brau, James C. & Couch, Robert B. & Sutton, Ninon K., 2012. "The Desire to Acquire and IPO Long-Run Underperformance," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 47(3), pages 493-510, June.
    7. Natalie Mizik & Robert Jacobson, 2007. "Myopic Marketing Management: Evidence of the Phenomenon and Its Long-Term Performance Consequences in the SEO Context," Marketing Science, INFORMS, vol. 26(3), pages 361-379, 05-06.
    8. Guldiken, Orhun & Tupper, Christina & Nair, Anil & Yu, Huizhi, 2017. "The impact of media coverage on IPO stock performance," Journal of Business Research, Elsevier, vol. 72(C), pages 24-32.
    9. Alok R. Saboo & Rajdeep Grewal, 2013. "Stock Market Reactions to Customer and Competitor Orientations: The Case of Initial Public Offerings," Marketing Science, INFORMS, vol. 32(1), pages 70-88, October.
    10. Shane A. Corwin & Paul Schultz, 2005. "The Role of IPO Underwriting Syndicates: Pricing, Information Production, and Underwriter Competition," Journal of Finance, American Finance Association, vol. 60(1), pages 443-486, February.
    11. Bajo, Emanuele & Croci, Ettore & Marinelli, Nicoletta, 2020. "Institutional investor networks and firm value," Journal of Business Research, Elsevier, vol. 112(C), pages 65-80.
    12. Feng, Cong & Patel, Pankaj C. & Xiang, Kexin, 2020. "The well-trodden path: Complementing market and entrepreneurial orientation with a strategic emphasis to influence IPO survival in the United States," Journal of Business Research, Elsevier, vol. 110(C), pages 370-385.
    13. Habib, Michel A & Ljungqvist, Alexander P, 2001. "Underpricing and Entrepreneurial Wealth Losses in IPOs: Theory and Evidence," The Review of Financial Studies, Society for Financial Studies, vol. 14(2), pages 433-458.
    14. Benveniste, Lawrence M. & Spindt, Paul A., 1989. "How investment bankers determine the offer price and allocation of new issues," Journal of Financial Economics, Elsevier, vol. 24(2), pages 343-361.
    15. repec:bla:jfinan:v:59:y:2004:i:6:p:2871-2901 is not listed on IDEAS
    16. Neupane, Suman & Poshakwale, Sunil S., 2012. "Transparency in IPO mechanism: Retail investors’ participation, IPO pricing and returns," Journal of Banking & Finance, Elsevier, vol. 36(7), pages 2064-2076.
    17. Cook, Douglas O. & Kieschnick, Robert & Van Ness, Robert A., 2006. "On the marketing of IPOs," Journal of Financial Economics, Elsevier, vol. 82(1), pages 35-61, October.
    18. Song, Sangcheol & Zeng, Yuping & Zhou, Bing, 2021. "Information asymmetry, cross-listing, and post-M&A performance," Journal of Business Research, Elsevier, vol. 122(C), pages 447-457.
    19. Chao Chen & Haina Shi & Haoping Xu, 2013. "Underwriter Reputation, Issuer Ownership, and Pre-IPO Earnings Management: Evidence from China," Financial Management, Financial Management Association International, vol. 42(3), pages 647-677, September.
    20. Laura Xiaolei Liu & Ann E. Sherman & Yong Zhang, 2014. "The Long-Run Role of the Media: Evidence from Initial Public Offerings," Management Science, INFORMS, vol. 60(8), pages 1945-1964, August.
    21. Chang, Young Bong & Kwon, YoungOk, 2020. "Attention-grabbing IPOs in early stages for IT firms: An empirical analysis of post-IPO performance," Journal of Business Research, Elsevier, vol. 109(C), pages 111-119.
    22. James C. Brau & James Cicon & Grant McQueen, 2016. "Soft Strategic Information and IPO Underpricing," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 17(1), pages 1-17, January.
    23. Hsuan‐Chi Chen & Jay R. Ritter, 2000. "The Seven Percent Solution," Journal of Finance, American Finance Association, vol. 55(3), pages 1105-1131, June.
    24. Katrina Ellis & Roni Michaely & Maureen O'Hara, 2000. "When the Underwriter Is the Market Maker: An Examination of Trading in the IPO Aftermarket," Journal of Finance, American Finance Association, vol. 55(3), pages 1039-1074, June.
    25. Imran S. Currim & Jooseop Lim & Yu Zhang, 2018. "Effect of analysts’ earnings pressure on marketing spending and stock market performance," Journal of the Academy of Marketing Science, Springer, vol. 46(3), pages 431-452, May.
    26. Bartov, Eli & Givoly, Dan & Hayn, Carla, 2002. "The rewards to meeting or beating earnings expectations," Journal of Accounting and Economics, Elsevier, vol. 33(2), pages 173-204, June.
    27. Wang, Taiyuan & Qureshi, Israr & Deeds, David & Ren, Yi, 2019. "How do technology ventures signal IPO quality? A configurational approach," Journal of Business Research, Elsevier, vol. 99(C), pages 105-114.
    28. Zhi Da & Joseph Engelberg & Pengjie Gao, 2011. "In Search of Attention," Journal of Finance, American Finance Association, vol. 66(5), pages 1461-1499, October.
    29. Michaely, Roni & Shaw, Wayne H, 1994. "The Pricing of Initial Public Offerings: Tests of Adverse-Selection and Signaling Theories," The Review of Financial Studies, Society for Financial Studies, vol. 7(2), pages 279-319.
    30. Ming Dong & Jean‐Sébastien Michel & J. Ari Pandes, 2011. "Underwriter Quality and Long‐Run IPO Performance," Financial Management, Financial Management Association International, vol. 40(1), pages 219-251, March.
    31. Alexander Ljungqvist & William J. Wilhelm, 2005. "Does Prospect Theory Explain IPO Market Behavior?," Journal of Finance, American Finance Association, vol. 60(4), pages 1759-1790, August.
    32. Tim Loughran & Jay Ritter, 2004. "Why Has IPO Underpricing Changed Over Time?," Financial Management, Financial Management Association, vol. 33(3), Fall.
    33. Huang, Rongbing & Zhang, Donghang, 2011. "Managing Underwriters and the Marketing of Seasoned Equity Offerings," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 46(1), pages 141-170, February.
    34. Alok R. Saboo & Anindita Chakravarty & Rajdeep Grewal, 2016. "Organizational Debut on the Public Stage: Marketing Myopia and Initial Public Offerings," Marketing Science, INFORMS, vol. 35(4), pages 656-675, July.
    35. Gao, Xiaohui & Ritter, Jay R., 2010. "The marketing of seasoned equity offerings," Journal of Financial Economics, Elsevier, vol. 97(1), pages 33-52, July.
    36. Reena Aggarwal, 2000. "Stabilization Activities by Underwriters after Initial Public Offerings," Journal of Finance, American Finance Association, vol. 55(3), pages 1075-1103, June.
    37. Chemmanur, Thomas J & Fulghieri, Paolo, 1994. "Investment Bank Reputation, Information Production, and Financial Intermediation," Journal of Finance, American Finance Association, vol. 49(1), pages 57-79, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ranganathan, Kavitha & Saraogi, Aayush, 2021. "What explains voluntary premarket underpricing and aftermarket mispricing in Indian IPOs?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 32(C).
    2. Chang, Young Bong & Kwon, YoungOk, 2020. "Attention-grabbing IPOs in early stages for IT firms: An empirical analysis of post-IPO performance," Journal of Business Research, Elsevier, vol. 109(C), pages 111-119.
    3. Michael O'Connor Keefe & David Gallagher, 2014. "Does the effect of revealed private information on initial public offering (IPO) first trading day return differ by IPO market heat?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 54(3), pages 921-964, September.
    4. Jeon, Jin Q. & Lee, Cheolwoo & Nasser, Tareque & Via, M. Tony, 2015. "Multiple lead underwriter IPOs and firm visibility," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 128-149.
    5. Neupane, Suman & Thapa, Chandra, 2013. "Underwriter reputation and the underwriter–investor relationship in IPO markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 24(C), pages 105-126.
    6. Fernando, Chitru S. & Gatchev, Vladimir A. & May, Anthony D. & Megginson, William L., 2015. "Prestige without purpose? Reputation, differentiation, and pricing in U.S. equity underwriting," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 41-63.
    7. Oehler, Andreas & Rummer, Marco & Smith, Peter N., 2004. "IPO Pricing and the Relative Importance of Investor Sentiment: Evidence from Germany," Discussion Papers 26, University of Bamberg, Chair of Finance.
    8. Jay R. Ritter & Ivo Welch, 2002. "A Review of IPO Activity, Pricing, and Allocations," Journal of Finance, American Finance Association, vol. 57(4), pages 1795-1828, August.
    9. Feng, Xunan & Johansson, Anders C. & Wei, Dengxi, 2023. "Judging a book by its cover: Analysts and attention-driven price patterns in China's IPO market," Pacific-Basin Finance Journal, Elsevier, vol. 78(C).
    10. Huang, Rongbing & Shangguan, Zhaoyun & Zhang, Donghang, 2008. "The networking function of investment banks: Evidence from private investments in public equity," Journal of Corporate Finance, Elsevier, vol. 14(5), pages 738-752, December.
    11. Jeon, Jin Q. & Ligon, James A., 2011. "The role of co-managers in reducing flotation costs: Evidence from seasoned equity offerings," Journal of Banking & Finance, Elsevier, vol. 35(5), pages 1041-1056, May.
    12. Patrick M. Corrigan, 2022. "Does an initial public offering (IPO) issuer's Securities and Exchange Commission registration fee calculation method predict pricing revisions and IPO underpricing?," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 19(4), pages 1114-1147, December.
    13. Grammenos, Costas Th. & Papapostolou, Nikos C., 2012. "US shipping initial public offerings: Do prospectus and market information matter?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(1), pages 276-295.
    14. Chuluun, Tuugi, 2015. "The role of underwriter peer networks in IPOs," Journal of Banking & Finance, Elsevier, vol. 51(C), pages 62-78.
    15. Cook, Douglas O. & Kieschnick, Robert & Van Ness, Robert A., 2006. "On the marketing of IPOs," Journal of Financial Economics, Elsevier, vol. 82(1), pages 35-61, October.
    16. Arnab Bhattacharya & Binay Bhushan Chakrabarti & Chinmoy Ghosh & Milena Petrova, 2020. "Innovations in financing: The impact of anchor investors in Indian IPOs," European Financial Management, European Financial Management Association, vol. 26(4), pages 1059-1106, September.
    17. Bradley, Daniel J. & Gonas, John S. & Highfield, Michael J. & Roskelley, Kenneth D., 2009. "An examination of IPO secondary market returns," Journal of Corporate Finance, Elsevier, vol. 15(3), pages 316-330, June.
    18. Fabrizio Adriani & Luca G. Deidda & Silvia Sonderegger, 2014. "How do Financial Intermediaries Create Value in Security Issues?," Review of Finance, European Finance Association, vol. 18(5), pages 1915-1951.
    19. Klein, Peter G. & Wuebker, Robert & Zoeller, Kathrin, 2016. "Relationship banking and conflicts of interest: Evidence from German initial public offerings," Journal of Corporate Finance, Elsevier, vol. 39(C), pages 210-221.
    20. Agathee, Ushad Subadar & Sannassee, Raja Vinesh & Brooks, Chris, 2012. "The underpricing of IPOs on the Stock Exchange of Mauritius," Research in International Business and Finance, Elsevier, vol. 26(2), pages 281-303.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbrese:v:163:y:2023:i:c:s0148296323002862. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jbusres .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.