Underpricing and long-run performance of Chinese IPOs: the role of underwriter reputation |
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| Authors: | Chen Su Kenbata Bangassa |
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| Affiliation: | (1) Health Care Management Program, John A. Walker College of Business, Appalachian State University, 416 Howard Street, Boone, NC 28608, USA;(2) Graduate School of Management, University of Alabama at Birmingham, Birmingham, AL 35294-4460, USA;(3) School of Public Health, University of Alabama at Birmingham, Birmingham, AL 35294, USA |
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| Abstract: | This study examines the impact of underwriter reputation on IPO underpricing and long-run performance in the China stock market over the period 2001 to 2006. This sample period is notable for the implementation of a verification and approval system that occurred during it, which provided underwriters more freedom to price IPOs. We develop two alternative proxies to measure underwriter reputation based on either the ratio of the total gross proceeds raised or the number of IPOs managed by each underwriter. We find that underwriter reputation does not affect the level of underpricing, but that the level of long-run underperformance is significantly mitigated when IPOs are managed by more prestigious underwriters. |
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