Underwriter Reputation and Post-IPO Performance:New Evidence from IPO Fraud of Chinese Listed Companies
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| Title | Underwriter Reputation and Post-IPO Performance:New Evidence from IPO Fraud of Chinese Listed Companies
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| Author | Zhang Xueyong and Zhang Qiuyue |
| Organization | School of Finance, Central University of Finance and Economics |
| Email | zxy_616@163.com; 604525909@qq.com |
| Key Words | IPO Fraud; Underwriter reputation; IPO performance; DID |
| Abstract | Existing literature has shown that underwriter reputation has a significant impact on the IPO performance of listed companies, but there always has been controversy about the measurement of underwriter reputation. Different from the general use of ranking, market share or other indirect proxies, this paper examines the underwriter reputation from a new perspective by using IPO fraud of Chinese listed companies. We divided the underwriters into two types, the good reputation ones and the bad reputation ones using two methods. Firstly, we refer underwriters with clients reporting IPO fraud to the bad reputation ones, comparing to the good reputation ones without IPO clients reporting fraud in the same period. Secondly, underwriters own bad reputation after their corporate clients was caught IPO fraud while the same underwriters enjoy good reputation before their clients reporting fraud. Using cross-sectional method and difference-in-difference (DID) approach, we find that (1) firms going public hiring bad reputation underwriter exhibited higher underpricing levels and a lower long-term return compared to the firms that hired the good reputation underwriter; (2) compared with traditional reputation proxies, the new proxy constructed by IPO fraud is more effective. This paper is of great significance for the mechanism of underwriter reputation. |
| Serial Number | WP1130 |
| Time | 2016-11-15 |
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