Investment banking, Initial public offering, Differentiating factors, Seven percent puzzle, G24, G31, L11,

A. Gande

C. James

C.G. Dunbar

D.E. Logue

G. Ellison

H.-C. Chen

J. Booth

J. Ritter

J. Rotemberg

Kedar S. Kulkarni

L. Benveniste

L. Krigman

L.M. Benveniste

M. Lowry

P. Dutta

R. Beatty

R. Carter

R.G. Eccles

R.S. Hansen

T. Chemmanur

Tarun Sabarwal

W. Christie

Kedar Kulkarni

Research Papers in Economics

To what extent are investment bank-differentiating factors relevant for firms floating moderate-sized IPOs?

The original publication is available at www.springerlink.com.One explanation provided for the relatively high and increasingly stable spreads for moderate-sized
IPOs ($20-$80 million) documented in Chen and Ritter (2000) is that issuing firms focus less on price
and more on a combination of investment bank-differentiating factors (such as underwriter
prestige, analyst coverage, industry expertise, under-pricing, price stabilization activities, liquidity
provision, and so on,) and banks use industry-based differentiation as a source of market power.
Using a new approach developed in a model of firm location choice due to Ellison and Glaeser
(1997), this paper presents some evidence on the combined relevance of such bank-differentiating
factors, over and above bank size, for firms choosing investment banks for floating IPOs. For
moderate-sized IPOs, there is a little, but not much evidence that such factors are a good
explanation for high and increasingly stable spreads. Other than in a few of the largest industries,
bank-differentiating factors are not significantly relevant for a large proportion of industries.
Moreover, one aggregate measure of differentiation is declining over time

Kulkarni, Kedar S.

Sabarwal, Tarun

KU ScholarWorks

To What Extent Are Investment Bank-Differentiating Factors Relevant For Firms Floating Moderate-Sized IPOs?

Crossref

http://hdl.handle.net/10.1007/s10436-006-0054-y

To what extent are investment bank-differentiating factors relevant for firms floating moderate-sized IPOs?

Abstract

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Research Papers in Economics

KU ScholarWorks

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