Do advisors improve IPO outcomes?

Abstract

Issuers increasingly appoint advisers in IPOs alongside underwriters. After controlling for self-selection bias in adviser-issuer matching, our evidence shows that advisers in aggregate have no association with first-day returns, withdrawals, or gross spreads in European IPOs. However, underpricing of IPOs with generalist advisers (who offer diverse services alongside IPOs) is significantly greater than with specialist advisers. We link these findings to the different incentives of generalists and specialists. Our results are consistent with naivety on the part of certain issuers, but more likely reflect the willingness of large issuers to pay through IPO underpricing for the wider services of generalists.

Keywords: initial public offerings, underpricing, advisors, incentives

JEL Classification: G24, G30