A COMPARISON OF UNDERWRITER REPUTATION MEASUREMENT METHODS IN EXPLAINING IPO STOCK PERFORMANCE

Main Article Content

Adrian Teja

Abstract

This study objective compares the underwriter reputation, measured by a different method, in explaining Initial Public Offering (IPO) performance. The reputation is measured based on underwriter IPO frequency and deal value. The underwriter's reputation is then ranked and categorized into quartiles. We use cross-section regression methods to test the effect of different underwriter reputation measurement methods on IPO performance. The dependent variable is short-term and long-term IPO performance. The independent variable is four underwriter reputation categories represented by three-level dummy variables. We found that only underwriter reputation measured by IPO frequency can explain IPO performance. The findings suggest IPO frequency help underwriter understand the market condition and value IPO more accurately. Firms that want to reduce the cost of IPO underpricing should choose underwriters with a higher IPO frequency.

Downloads

Download data is not yet available.

Article Details

How to Cite
Teja, A. (2021). A COMPARISON OF UNDERWRITER REPUTATION MEASUREMENT METHODS IN EXPLAINING IPO STOCK PERFORMANCE. Akurasi : Jurnal Studi Akuntansi Dan Keuangan, 4(2), 195-209. https://doi.org/10.29303/akurasi.v4i2.85
Section
Articles
Author Biography

Adrian Teja, Universitas Prasetiya Mulya

adrian_photo.jpg

References

Aggarwal, R. (2000). Stabilization activities by underwriters after initial public offerings. Journal of Finance 55, 1075-1103.
Aggarwal, R. & Rivoli, P. (1990) Fads in the Initial Public Offering Market? Financial Management, 19, 45-57. https://doi.org/10.2307/3665609
Allen, F., & Faulhaber, G.R. (1989). Signaling by underpricing in the IPO market. Journal of Financial Economics 23, 303-323.
Banerjee, S., Dai, L., & Shresta, K. (2011). Cross-country IPOs: what explains differences in underpricing? Journal of Corporate Finance 17, 1289-1305.
Brav, A., & Gompers, P.A. (2003). The role of lockups in Initial Public Offerings. Review of Financial Studies 16, 1-29.
Butler, A.W., Keefe, M.O., & Kieschnick, R. (2014). Robust determinants of IPO underpricing and their implications for IPO research. Journal of Corporate Finance 27, 367-383.
Carter, R., & Manaster, S. (1990). Initial public offerings and underwriter reputation. Journal of Finance 45, 1045-1067.
Carter, R.B., Dark, F.H., & Singh, A.K. (1998). Underwriter reputation, initial returns, and the long-run performance of IPO stocks. Journal of Finance 53, 285-311.
Chahine, S., & Filatotchev, I. (2008). The effects of venture capitalist affiliation to underwriters on short- and long-term performance in French IPOs. Global Finance Journal 18, 351-372.
Chua, A. (2014). Market conditions, underwriter reputation, and first-day return of IPOs. Journal of Financial Markets 19, 131-153.
Corwin, S.A., & Schultz, P. (2005). The role of IPO underwriting syndicates: pricing, information production, and underwriter competition. Journal of Finance 60, 443-486.
Chintya, N., Theodora, N., Evelyn, V., & Teja, A. (2020). Short-term and long-term effect of firms' IPO on competitors' performance. Journal of Finance and Accounting Research, 2(1), 114–139. https://doi.org/10.32350/JFAR/0201/05
Dawson, S.M., (1987). Secondary stock market performance of initial public offers, Hong Kong, Singapore, and Malaysia: 1978–1984. Journal of Business Finance and Accounting 14, 65–76.
Dong, M., Michel, J.S., & Pandes, J.A. (2011). Underwriter quality and long-run IPO performance. Financial Management 40, 219-251.
Dunbar, C.G. (2000). Factors affecting investment bank initial public offering market share. Journal of Financial Economics, 3-41.
Engelen, PJ, & Essen, M. (2010). Underpricing of IPOs: firm-, issue- and country-specific characteristics. Journal of Banking and Finance 34, 1958-1969.
Fang, L.H. (2005). Investment bank reputation and the price and quality of underwriting services. Journal of Finance 60, 2729-2761.
Fernando, C.C., Gatchev, V.A., May, A.D., & Megginson, W.L. (2015). Prestige without purpose? Reputation, differentiation, and pricing in U.S equity underwriting. Journal of Corporate Finance 32, 41-63.
Gao, N., & Jain, B.A. (2011). Founder of CEO management and the long-run investment performance of IPO firms. Journal of Banking and Finance 35, 1669-1682.
Jelic, R., Saadouni, B., & Briston, R.J. (2001). Performance of Malaysian IPOs: underwriters' reputation and management earnings forecasts. Pacific-Basin Finance Journal 9, 457–486.
Jeon, J.Q., Lee, C., Nasser, T., & Via, M.T. (2015). Multiple lead underwriter IPOs and firm visibility. Journal of Corporate Finance 32, 128-149.
Krigman, L., & Jeffus, W. (2016). IPO pricing as a function of your investment banks' past mistakes: the case of Facebook. Journal of Corporate Finance 38, 335-344.
Hao, Q. (2007). Laddering in initial public offerings. Journal of Financial Economics 85, 102-122.
Horner, J. (2002). Reputation and competition. American Economic Review 92, 644-663.
Ibbotson, R.G. (1975). The price-performance of common stock new issues. Journal of Financial Economics 2, 235-272.
Jelic, R., Saadouni, B., & Briston, R.J. (2001). Performance of Malaysian IPOs: underwriters' reputation and management earnings forecasts. Pacific-Basin Finance Journal 9, 457–486.
Ji, H. (2020). Does the Underwriter Reputation Affect the Pricing of Local Government Bonds in China? International Business Research, 13(7), 45. https://doi.org/10.5539/ibr.v13n7p45
Kunimura, M., & Severn, A.K. (1990).The post-issue performance of new issues in Japanese stocks. In: Rhee, S.G., Chang, R.P. (Eds.), Pacific-Basin Capital Markets Research I. North-Holland, Amsterdam, 255–263.
Lee, P.J., Taylor, S.L., & Walter, T.S. (1996). Australian IPO pricing in the short and long run. Journal of Banking and Finance 20, 1189-1210.
Logue, D.E., Rogalski, R.J., Seward, J.K., & Foster-Johnson, L. (2002). What is special about the roles of underwriter reputation market activities in Initial Public Offerings? Journal of Business 75, 213-243.
Loughran, T., Ritter, J.R., & Rydqvist, K. (1994). Initial public offerings: international insights. Pacific-Basin Finance Journal 2, 165–199.
Loughran, T., & Ritter, J.R. (1995). The new issues puzzle. Journal of Finance 50, 23–51.
Moshirian, F., Ng, D., & Wu, E. (2010). Model specification and IPO performance: new insights from Asia. Research in International Business and Finance 24, 62-74.
Rashid, R.M., Abdul-Rahim, R., & Yong, O. (2014). The influence of lock-up provisions on IPO initial returns: evidence from an emerging market. Economic Systems 38, 487-501.
Reber, B., & Vencappa, D. (2016). Deliberate premarket underpricing and aftermarket mispricing: new insight on IPO pricing. International Review of Financial Analysis 44, 18-33.
Ritter, J.R. (2003). Investment banking and securities issuance, Chapter 5. In: Constantinides, G., Harris, M., Stulz, R. (Eds.), Handbook of the Economics of Finance. Elsevier B.V., Amsterdam, 255–304.
Rock, K. (1986). Why new issues are underpriced. Journal of Financial Economics 15, 187-212.
Su, C., & Bangassa, K. (2011). The impact of underwriter reputation on initial returns and long-run performance of Chinese IPOs. Journal of International Financial Markets, Institutions and Money 21, 760-791.
Vong, A.P.I., & Trigueiros, D. (2010). The short-run price performance of initial public offerings in Hong Kong: new evidence. Global Finance Journal 21, 253-261.
Widarjo, W., Rahmawati, Bandi, & & Widagdo, A. K. (2017). Underwriter reputation, intellectual capital disclosure, and underpricing. International Journal of Business and Society 18(2), 227–244. https://doi.org/10.33736/ijbs.480.2017
Yong, O. (2006). A review of IPO research in Asia: What's next? Pacific-Basin Finance Journal 15, 253-275.
Abstract viewed = 684 times
PDF downloaded = 425 times