IPO underwriting and subsequent lending |
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Authors: | Hsuan-Chi Chen Keng-Yu Ho Pei-Shih Weng |
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Institution: | 1. Anderson School of Management, University of New Mexico, Albuquerque, NM 87131, USA;2. Department of Finance, National Taiwan University, 106 Taipei, Taiwan;3. Department of Finance, National Dong Hwa University, 974 Hualien, Taiwan |
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Abstract: | This study investigates the relation between IPO underwriting and subsequent lending. We find that when a bank underwrites a firm’s IPO, the bank is more likely to provide the issuer with future loans at a lower cost, compared to banks without an IPO underwriting relationship. The evidence also suggests that the underwriting banks share information surplus with the IPO firms in the post-IPO loans, supporting the cost-saving hypothesis. Overall, the evidence for the relation between prior IPO underwriting and subsequent lending supports the notion that firms can derive value from investment bank relationships. |
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Keywords: | G00 G20 G30 |
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