The Impact of Underwriter Reputation on IPO Underpricing
Author | : Jonas Wieckert |
Publisher | : |
Total Pages | : |
Release | : 2018 |
ISBN-10 | : OCLC:1057448256 |
ISBN-13 | : |
Rating | : 4/5 ( Downloads) |
Download or read book The Impact of Underwriter Reputation on IPO Underpricing written by Jonas Wieckert and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis investigates the relation between underpricing and equity underwriter reputation in the Swiss market. It examines a handpicked sample of 109 IPOs that took place between 1997 and 2017. The examination finds that there was average underpricing of around eight percent for the sample period. However, the underpricing varies vastly over the sample. The initial years see high underpricing of around twelve percent, whereas since 2008, underpricing has been below six percent on average. This is somewhat lower than the underpricing found in earlier Swiss studies from the 1980s and 1990s. Considering the global trend of lower initial returns this is perfectly expectable and consistent. The results of the regression analysis to determine the impact of reputation on underpricing were mixed. Depending on the method of measurement and significance level the impact varied from statistically insignificant to positive and negative. These findings are interpreted in a way that suggests that a weighted market share approach is the best way to measure underwriter reputation in the small Swiss market. Such an interpretation means that increasing underwriter reputation does indeed lead to lower underpricing. To give the regression model more accuracy, a set of additional explanatory variables had to be included in the analysis as well. Around half of them did not perform in the way that was initially predicted. But none of them behaved in a completely inexplicable way that is completely inconsistent with pre-existing literature. Better underwriter reputation was found to reduce underpricing, but the explanatory variables of logarithmised gross proceeds and syndicate size had an even stronger coefficient. While the empirical results were mixed, this paper also contributes to the literature by offering the first underwriter ranking for the Swiss market.