Factors Affecting Investment Bank Initial Public Offering Market Share

27 Pages Posted: 6 May 1997

See all articles by Craig G. Dunbar

Craig G. Dunbar

Ivey Business School, Western University

Date Written: April 1997

Abstract

This paper examines the effect of several factors on the market share of investment banks that act as book managers in initial public offerings (IPOs) between 1984 and 1993. For established banks, IPO underpricing has a negative impact on market share, suggesting future issuers avoid banks that leave too much "money on the table". While average abnormal long-run performance has a positive impact on established bank's market share, association with extremely positive long-run performance damages market share. Abnormal underwriter compensation (cash spread plus expenses) has a positive impact on the market share of established banks. Since these banks expect increased future market share they place more at risk in current offerings and, therefore, charge higher compensation. Investment banks concentrating their activities in fewer industries lose market share. Banks marketing IPOs in January or on Mondays also lose market share. Finally, association with withdrawn IPOs has a significantly negative effect on an investment bank's ability to compete for future offerings. These factors have a less significant effect, statistically and economically, on the market share of less established banks, consistent with the notion that less reputation is placed at risk.

JEL Classification: G24, C21

Suggested Citation

Dunbar, Craig G., Factors Affecting Investment Bank Initial Public Offering Market Share (April 1997). Available at SSRN: https://ssrn.com/abstract=38480 or http://dx.doi.org/10.2139/ssrn.38480

Craig G. Dunbar (Contact Author)

Ivey Business School, Western University ( email )

1255 Western Road
Room 2309
London, Ontario N6G 0N1
Canada
519-661-3716 (Phone)
519-661-3963 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
1,456
rank
11,729
Abstract Views
6,179
PlumX Metrics