Nepotism in IPOs:  Consequences for Issuers and Investors

Francois Degeorge; Giuseppe Pratobevera

doi:10.1017/S002210902400053X

Nepotism in IPOs: Consequences for Issuers and Investors

Francois Degeorge, Giuseppe Pratobevera^*

^*Corresponding author for this work

Research output: Contribution to journal › Article (Academic Journal) › peer-review

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Abstract

IPO underwriters have an incentive to underprice an IPO when they allocate shares to their affiliated funds. We label this conflict of interest “supernepotism” and we analyze its effect on IPO pricing. Using a regression discontinuity design (RDD) on a novel hand-collected dataset, we find that higher allocations to underwriter-affiliated funds cause higher IPO underpricing. Our evidence suggests that supernepotism has monetary costs for issuers.

Original language	English
Pages (from-to)	2367-2397
Number of pages	31
Journal	Journal of Financial and Quantitative Analysis
Volume	60
Issue number	5
Early online date	8 Apr 2025
DOIs	https://doi.org/10.1017/S002210902400053X
Publication status	E-pub ahead of print - 8 Apr 2025

Bibliographical note

Publisher Copyright:
© The Author(s), 2025. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington.

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10.1017/S002210902400053XLicence: CC BY

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title = "Nepotism in IPOs: Consequences for Issuers and Investors",

abstract = "IPO underwriters have an incentive to underprice an IPO when they allocate shares to their affiliated funds. We label this conflict of interest “supernepotism” and we analyze its effect on IPO pricing. Using a regression discontinuity design (RDD) on a novel hand-collected dataset, we find that higher allocations to underwriter-affiliated funds cause higher IPO underpricing. Our evidence suggests that supernepotism has monetary costs for issuers. ",

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AU - Degeorge, Francois

AU - Pratobevera, Giuseppe

PY - 2025/4/8

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N2 - IPO underwriters have an incentive to underprice an IPO when they allocate shares to their affiliated funds. We label this conflict of interest “supernepotism” and we analyze its effect on IPO pricing. Using a regression discontinuity design (RDD) on a novel hand-collected dataset, we find that higher allocations to underwriter-affiliated funds cause higher IPO underpricing. Our evidence suggests that supernepotism has monetary costs for issuers.

AB - IPO underwriters have an incentive to underprice an IPO when they allocate shares to their affiliated funds. We label this conflict of interest “supernepotism” and we analyze its effect on IPO pricing. Using a regression discontinuity design (RDD) on a novel hand-collected dataset, we find that higher allocations to underwriter-affiliated funds cause higher IPO underpricing. Our evidence suggests that supernepotism has monetary costs for issuers.

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