The focus of this paper is the inverse relationship between underwriter reputation and the underpricing of new issues. New issue underpricing results in money left on the table by issuing firms after an IPO. To avoid leaving money on the table, an issuing firm will hire an underwriter that can afford the risk of low underpricing, in exchange for paying a large spread to the underwriter. It is assumed that underwriters with a strong reputation can afford the risk of low underpricing more easily than underwriters with a weak reputation. In order to improve their reputation, or maintain a strong reputation, underwriters will consistently minimize the underpricing of new issues. In addition to the reputation of the underwriter, underwriter compensation, the age of the issuing firm, syndicate size, and proceeds of the initial sale of stock are compared to the extent of underpricing for each IPO.
Wilhelm, Daniel C., "An Analysis of the Impact of Underwriter Reputation on the Underpricing of New Issues" (2013). Senior Independent Study Theses. Paper 800.
ipo underpricing, underwriter reputation
Bachelor of Arts
Senior Independent Study Thesis
© Copyright 2013 Daniel C. Wilhelm