IPO Underwriting Syndicates: Do Social Ties Help Get a Seat at the Table?
John Cooney Jr.
Texas Tech University - Rawls College of Business
Case Western Reserve University - Weatherhead School of Management
Ajai K. Singh
Lehigh University - College of Business & Economics
March 06, 2014
We examine the role of social ties in IPO underwriting syndicate formation. An investment bank is more likely to be included in the underwriting syndicate — as a book manager, co-manager, or non-managing syndicate member — when it is connected to the IPO firm through interpersonal social ties between the respective executives and directors. Social connections between an investment bank and the IPO’s book manager also increase the likelihood of the bank being chosen as the IPO’s co-manager or non-managing syndicate member. We further show that social ties, as a determinant of the formation of an IPO syndicate, complement other determinants discussed in the literature. In particular, we do not find evidence that social ties foster more cohesiveness in the IPO syndicate. These results are consistent with the role of familiarity in shaping business decisions.
Number of Pages in PDF File: 45
Keywords: G24, G32
JEL Classification: Social Networks, IPOs, Investment Banking, Underwriters
Date posted: November 23, 2012 ; Last revised: March 8, 2014
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