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Initial Public Offerings and Underwriter Reputation
Abstract
This paper examined the returns earned by subscribing to initial public offerings of equity (IPOs). Rock (1986) suggests that IPO returns are required by uninformed investors as compensation for the risk of trading against superior information. We show that IPOs with more informed investor capital require higher returns. The marketing underwriter's reputation reveals the expected level of “informed” activity. Prestigious underwriters are associated with lower risk offerings. With less risk there is less incentive to acquire information and fewer informed investors. Consequently, prestigious underwriters are associated with IPOs that have lower returns.
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Citations
Cited by
Interorganizational Endorsements and the Performance of Entrepreneurial Ventures
Stuart, T. E., Hoang, H., & Hybels, R. C. (1999) · Administrative Science Quarterly · doi:10.2307/2666998 · Cited by 2,751
Grandstanding in the venture capital industry
Gompers, P. A. (1996) · Journal of Financial Economics · doi:10.1016/0304-405x(96)00874-4 · Cited by 1,347
The role of venture capital in the creation of public companies
Barry, C. B., Muscarella, C. J., Peavy, J. W., & Vetsuypens, M. R. (1990) · Journal of Financial Economics · doi:10.1016/0304-405x(90)90064-7 · Cited by 1,167
MEDIA LEGITIMATION EFFECTS IN THE MARKET FOR INITIAL PUBLIC OFFERINGS.
Pollock, T. G., & Rindova, V. P. (2003) · Academy of Management Journal · doi:10.2307/30040654 · Cited by 1,122
Organizational Reputation: A Review
Lange, D., Lee, P. M., & Dai, Y. (2011) · Journal of Management · doi:10.1177/0149206310390963 · Cited by 960
Metadata
- Authors
- CARTER, R., & MANASTER, S.
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 1990-09
- Volume
- 45
- Issue
- 4
- Pages
- 1045-1067
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W2085162670
- Cited by
- 2,441
- References
- 0
- FWCI
- 44.78
- Type
- journal article
- Language
- en
- Open access
- closed
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- CARTER, R., & MANASTER, S. (1990). Initial Public Offerings and Underwriter Reputation. The Journal of Finance. https://doi.org/10.1111/j.1540-6261.1990.tb02426.x
Data sources
Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
