The Role of Underwriter Peer Networks in IPOs

Posted: 21 Aug 2014 Last revised: 3 Apr 2015

Date Written: September 1, 2014

Abstract

This study examines how various aspects of underwriter peer network affect IPOs. We use different network measures to capture underwriter centrality in the global network, cohesion and diversity within network, and prior industry experience of network partners. Our results show that IPOs underwritten by book managers with more central and cohesive networks and partners with previous industry experience are associated with a higher likelihood of an offer price revision and larger price revisions. We also find book managers with more central networks and partners with previous industry experience are associated with higher short-run stock returns, while book managers that maintain more reciprocated peer relationships tend to underprice more. These results indicate that underwriters use peer networks to produce information and place securities, and network structure and characteristics have implications for the quantity and quality of information and the level of cooperative efforts shared among underwriters.

Keywords: underwriters, IPOs, network analysis

JEL Classification: G24, L14, G10

Suggested Citation

Chuluun, Tuugi, The Role of Underwriter Peer Networks in IPOs (September 1, 2014). Journal of Banking and Finance Volume 51, February 2015, Pages 62–78, Available at SSRN: https://ssrn.com/abstract=2484344 or http://dx.doi.org/10.2139/ssrn.2484344

Tuugi Chuluun (Contact Author)

Loyola University Maryland ( email )

4501 North Charles Street
Baltimore, MD 21210-2699
United States

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