Do Multiple Credit Ratings Reduce Money Left on the Table? Evidence from U.S. IPOs

65 Pages Posted: 22 Apr 2019 Last revised: 16 Nov 2019

See all articles by Marc Goergen

Marc Goergen

IE Business School, IE University; European Corporate Governance Institute (ECGI)

Dimitrios Gounopoulos

University of Bath

Panagiotis Koutroumpis

Queen Mary University London; Georgia Institute of Technology

Date Written: November 11, 2019

Abstract

We examine initial public offerings (IPOs) with single, multiple, and no credit ratings. We document a beneficial effect of credit ratings provided by the three main credit rating agencies on IPO underpricing, which is amplified by the existence of multiple credit ratings. Credit rating levels matter for IPOs with more than one rating but not for those with a single rating. Multi-rated firms also have higher probabilities of survival than those with a single or no rating. Finally, IPOs awarded a first credit rating on the borderline between investment and non-investment grade are more likely to seek an additional rating.

Keywords: Initial public offerings (IPOs); credit ratings; IPO underpricing; survivorship

JEL Classification: G10, G14, G39

Suggested Citation

Goergen, Marc and Gounopoulos, Dimitrios and Koutroumpis, Panagiotis, Do Multiple Credit Ratings Reduce Money Left on the Table? Evidence from U.S. IPOs (November 11, 2019). Available at SSRN: https://ssrn.com/abstract=3358474 or http://dx.doi.org/10.2139/ssrn.3358474

Marc Goergen

IE Business School, IE University ( email )

Finance Department
Maria de Molina, 12
Madrid, 28006
Spain

HOME PAGE: http://www.ie.edu/business-school/faculty-and-research/faculty/marc-goergen/

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Dimitrios Gounopoulos (Contact Author)

University of Bath ( email )

School of Management,
Wessex House, Claverton Down
Bath, BA2 7AY
United Kingdom

Panagiotis Koutroumpis

Queen Mary University London ( email )

Office GC 3.32
Graduate Centre, Mile End Campus
London, E14NS
United Kingdom
02078825872 (Phone)

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

Georgia Institute of Technology ( email )

Atlanta, GA 30332
United States

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