Investment Banks' Entry into New IPO Markets and IPO Underpricing

• 成果类型: Article
• 署名作者: Fung, Simon Yu Kit; Gul, Ferdinand A.; Radhakrishnan, Suresh
• 署名单位: Hong Kong Polytechnic University; Monash University; Monash University Malaysia; University of Texas System; University of Texas Dallas
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2013.1817
• 发表日期: 2014
• 页码: 1297-1316
• 关键词: IPO underpricing; market share; Investment banks; Hong Kong

摘要

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.