Bank-affiliated institutional investors and IPO syndicates formation

Giuseppe Pratobevera*

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)peer-review

Abstract

By using institutional trading data in a sample of US IPOs, I provide evidence that IPO syndicate banks use their affiliated institutional investors to build a relationship with IPO lead underwriters and boost their underwriting business. First, I show that investment managers provide unprofitable price support in the aftermarket of IPOs in which their parent banks are non-lead syndicate members. This costly support is concentrated in cold IPOs and IPOs net sold by independent institutions. Second, I show that lead underwriters are more likely to select in the IPO syndicate the banks whose affiliated institutional investors support IPO prices. I discuss and document evidence of the incentives of underwriters and affiliated institutions that make price support emerge in equilibrium.
Original languageEnglish
Article number102587
Number of pages22
JournalJournal of Corporate Finance
Volume86
Early online date3 May 2024
DOIs
Publication statusPublished - 9 May 2024

Bibliographical note

Publisher Copyright:
© 2024 The Author(s)

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