Investment Banks' Entry into New IPO Markets and IPO Underpricing

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Investment Banks' Entry into New IPO Markets and IPO Underpricing

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title Investment Banks' Entry into New IPO Markets and IPO Underpricing
contributor.author Fung, Simon Yu Kit
contributor.author Gul, Ferdinand A.
contributor.author Radhakrishnan, Suresh
contributor.LCNA 2003051787‏ (Radhakrishnan, S)
description.abstract We examine the relationship between investment banks' initial public offering (IPO) market shares and their prior IPO underpricing in the new IPO market for China-based companies on the Hong Kong Stock Exchange. To gain expertise in Chinese business practices, investment banks have the incentive to obtain business in this new IPO market by providing high offer prices to the issuer, leading to less underpricing and less money on the table. We hypothesize and find that the less an investment bank underprices China-based company IPOs, the greater its subsequent market share of China-based company IPOs in the Hong Kong Stock Exchange. Furthermore, this relationship is driven by a bank's initial China-based company IPO deals. These results suggest that in new IPO markets, investment banks' initial market shares, obtained through lower underpricing, help them grow their market shares in later periods, possibly through the expertise gained in the initial business.
identifier.issn 0025-1909
identifier.uri http://hdl.handle.net/10735.1/4005
identifier.bibliographicCitation Fung, Simon Yu Kit, Ferdinand A. Gul, and Suresh Radhakrishnan. 2014. "Investment Banks' Entry into New IPO Markets and IPO Underpricing." Management Science 60(5): 1297-1316.
identifier.volume 60
identifier.issue 5
identifier.startpage 1297
subject Going public (Securities)
subject Market share
subject Investment banking
subject China--Hong Kong
date.created 2014-05
publisher Informs
relation.uri http://dx.doi.org/10.1287/mnsc.2013.1817
rights ©2014 INFORMS
language.iso en
source.journal Management Science

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