The Quality and Price of Investment Banks’ Service: Evidence from the PIPE Market |
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| Authors: | Na Dai Hoje Jo John D Schatzberg |
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| Institution: | 1. Na Dai is an Assistant Professor of Finance at SUNY Albany in Albany, New York, USA.;2. Hoje Jo is an Associate Professor of Finance at Santa Clara University in Santa Clara, California, USA.;3. John D. Schatzberg is a Professor of Finance at the University of New Mexico in Albuquerque, New Mexico, USA. |
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| Abstract: | We investigate the market structure and the pricing by placement agents of private investments in public equities (PIPEs). Our findings indicate that more reputable agents are associated with larger offers and with firms possessing lower risk. Agent reputation is positively associated with lower discounts and an enhanced post-PIPE trading environment. Issuers pay a higher dollar fee for these benefits, although more reputable agents charge a lower percentage fee. The evidence suggests that it is the quality of the issuing firm, and the pricing and reputational concern of the placement agent, that drives the equilibrium in the PIPE market. |
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