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Underwriter reputation and IPO issuer alignment 1981-2005

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  • Carter, Richard B.
  • Dark, Frederick H.
  • Sapp, Travis R.A.

Abstract

We examine the long-term performance and characteristics of firms that went public from 1981 to 2005. We find that long-run returns declined and the proportion of failed and failing firms increased with underwriter reputation. The IPOs marketed by the more reputable underwriters were more likely to fail or be failing in the post-1980s period, but were still better than those of less reputable counterparts. The characteristics of the firms marketed by the more reputable underwriters did not appear to change substantially from decade to decade. We conclude that external market forces rather than conscious changes by underwriters caused the shift in the relation between failure rates and underwriter reputation from the 1980s to the subsequent period. We also find the "flip" in relationship between underwriter reputation and initial IPO return identified in the literature disappears after controlling for additional factors.

Suggested Citation

  • Carter, Richard B. & Dark, Frederick H. & Sapp, Travis R.A., 2010. "Underwriter reputation and IPO issuer alignment 1981-2005," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(4), pages 443-455, November.
  • Handle: RePEc:eee:quaeco:v:50:y:2010:i:4:p:443-455
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    2. Fu, Xudong & Lian, Qin & Tang, Tian & Wang, Qiming, 2015. "An empirical study of executive option grants around initial public offerings," The Quarterly Review of Economics and Finance, Elsevier, vol. 57(C), pages 207-221.
    3. Giorgio Albareto & Giuseppe Marinelli, 2018. "Italian banks and market-based corporate financing," Questioni di Economia e Finanza (Occasional Papers) 432, Bank of Italy, Economic Research and International Relations Area.
    4. Nugroho Sasikirono & Sumiati Sumiati & Nur Khusniyah Indrawati, 2018. "Underpricing and long-term market performance of initial public offerings in Indonesia: A quantile regression approach," Business and Economic Horizons (BEH), Prague Development Center, vol. 14(1), pages 152-167, January.

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