Universal Banking and Conflicts of Interest: Evidence from German Initial Public Offerings

Klein, Peter G.; Zoeller, Kathrin

doi:10.2139/ssrn.269797

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Universal Banking and Conflicts of Interest: Evidence from German Initial Public Offerings

27 Pages Posted: 31 Jan 2004

See all articles by Peter G. Klein

Peter G. Klein

Baylor University - Hankamer School of Business; NHH Norwegian School of Economics - Department of Strategy and Management; Ludwig von Mises Institute

This paper investigates conflicts of interest associated with relationship banking. Using a sample of 270 German initial public offerings (IPOs), we ask if universal-bankunderwritten IPOs perform differently from IPOs underwritten by specialized investment banks. We find that universal-bank affiliation is correlated with higher first-day returns (underpricing) but uncorrelated with long-term performance. This suggests that underpricing compensates for potential conflicts of interest. The results also suggest that preexisting bank relationships, rather than issuer characteristics, may determine the choice of underwriter.

Keywords: Universal banking, relationship banking, initial public offering, underpricing

Note: Previously titled "Universal-Bank Underwriting and Conflicts of Interest: Evidence from German Initial Public Offerings"

Keywords: Universal banking, relationship banking, initial public offering, underpricing

JEL Classification: G32, G34, G21, G24

Suggested Citation: Suggested Citation

Klein, Peter G. and Zoeller, Kathrin, Universal Banking and Conflicts of Interest: Evidence from German Initial Public Offerings (September 2003). Available at SSRN: https://ssrn.com/abstract=269797 or http://dx.doi.org/10.2139/ssrn.269797