The Certification Role Of Pre-IPO Banking Relationships: Evidence From IPO Underpricing in Japan

Yoshiaki Ogura*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

We find empirical evidence that pre-initial public offering (IPO) relationships with commercial banks through lending and investment via their venture capital subsidiaries significantly reduce IPO underpricing in Japan. This findings suggest that a pre-IPO banking relationship certifies the low risk of an IPO firm. Given the fact that institutional investors are a minority in the allocation of IPO stocks in Japan, this effect is expected to come mainly from reducing either the investors' winner's curse or the signaling incentive of IPO firms, rather than from the reduction in information rent for institutional investors participating in the book-building process.

Original languageEnglish
Pages (from-to)257-278
Number of pages22
JournalJapanese Economic Review
Volume68
Issue number2
DOIs
Publication statusPublished - 2017 Jun

ASJC Scopus subject areas

  • Economics and Econometrics

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