Bank-Affiliated Institutional Investors and IPO Syndicates Formation

54 Pages Posted: 4 Nov 2019 Last revised: 3 Jul 2022

Date Written: July 1, 2022


By using institutional trading data in a sample of US IPOs, I provide evidence that IPO syndicate banks use their affiliated institutional investors to build a relationship with IPO lead underwriters and boost their underwriting business. First, I show that investment managers provide unprofitable price support in the aftermarket of IPOs in which their parent banks are non-lead syndicate members. This costly support is concentrated in cold IPOs and IPOs net sold by independent institutions. Second, I show that lead underwriters are more likely to select in the IPO syndicate the banks whose affiliated institutional investors support IPO prices. I discuss and document evidence of the incentives of underwriters and affiliated institutions that make price support emerge in equilibrium.

Keywords: Institutional investors, Financial conglomerates, IPO syndicate, IPO aftermarket, Conflicts of interest

JEL Classification: G23, G24, G32, G14

Suggested Citation

Pratobevera, Giuseppe, Bank-Affiliated Institutional Investors and IPO Syndicates Formation (July 1, 2022). Available at SSRN: or

Giuseppe Pratobevera (Contact Author)

University of Bristol ( email )

University of Bristol,
Senate House, Tyndall Avenue
Bristol, BS8 ITH
United Kingdom

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