Banks’ Private Information and the Supply of Equity Capital: Evidence from Share Issuance and Withdrawal

50 Pages Posted: 15 Oct 2012 Last revised: 10 Jun 2014

See all articles by Mikael C. Bergbrant

Mikael C. Bergbrant

St. Johns University

Daniel Bradley

University of South Florida

Delroy M. Hunter

University of South Florida

Date Written: March 19, 2014

Abstract

If banks reveal their private information it should influence investors’ willingness to supply equity capital. We examine this in the setting of IPO markets using a private-information proxy from credit standards. We find that an unfavorable private-information signal results in a decline (increase) in the number of IPOs (withdrawals), indicating a rational capital-supply-driven link between bank loan and IPO markets. This link is strongest where banks’ private information should be most valuable to outside investors and is robust to endogeneity and changes in capital demand. Our results suggest that the credit channel is important to a wellfunctioning IPO market.

Keywords: IPO, withdrawn IPO, credit standards, lending standards, private information

JEL Classification: G21, G23, G24

Suggested Citation

Bergbrant, Mikael C. and Bradley, Daniel and Hunter, Delroy M., Banks’ Private Information and the Supply of Equity Capital: Evidence from Share Issuance and Withdrawal (March 19, 2014). Available at SSRN: https://ssrn.com/abstract=2161657 or http://dx.doi.org/10.2139/ssrn.2161657

Mikael C. Bergbrant

St. Johns University ( email )

8000 Utopia Parkway
Queens, NY 11439
United States
8134476288 (Phone)

HOME PAGE: http://www.bergbrant.com

Daniel Bradley

University of South Florida ( email )

Tampa, FL 33620
United States

Delroy M. Hunter (Contact Author)

University of South Florida ( email )

Dept of Finance, Muma College of Business
4202 E. Fowler Ave, BSN3403
Tampa, FL 33620
United States
(813) 843-2085 (Phone)
(813) 974-3084 (Fax)

HOME PAGE: http://www.usf.edu/business/contacts/hunter-delroy.aspx

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