The Quality and Price of Investment Banks' Service: Evidence from the PIPE Market

Financial Management, Forthcoming

48 Pages Posted: 2 Dec 2007 Last revised: 8 Nov 2009

See all articles by Na Dai

Na Dai

SUNY at Albany - School of Business

Hoje Jo

Santa Clara University

John Schatzberg

University of New Mexico - Robert O. Anderson Schools of Management

Date Written: July 14, 2009

Abstract

We investigate the market structure and the pricing by placement agents of private investments in public equities (PIPEs). Our findings indicate that more reputable agents are associated with larger offers and with firms possessing lower risk. Agent reputation is positively associated with lower discounts and an enhanced post-PIPE trading environment. Issuers pay a higher dollar fee for these benefits, although more reputable agents charge a lower percentage fee. The evidence suggests that it is the quality of the issuing firm, and the pricing and reputational concern of the placement agent that drives the equilibrium in the PIPE market.

Keywords: Investment bank, private investment in public equity (PIPE)

JEL Classification: G24, G32

Suggested Citation

Dai, Na and Jo, Hoje and Schatzberg, John, The Quality and Price of Investment Banks' Service: Evidence from the PIPE Market (July 14, 2009). Financial Management, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1034241

Na Dai (Contact Author)

SUNY at Albany - School of Business ( email )

1400 Washington Ave.
Albany, NY 12222
United States

Hoje Jo

Santa Clara University ( email )

Santa Clara, CA 95053
United States
408-224-8890 (Phone)
408-554-4029 (Fax)

John Schatzberg

University of New Mexico - Robert O. Anderson Schools of Management ( email )

Albuquerque, NM 87131
United States

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