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

    Research output: Contribution to journalArticle

    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
    JournalJapanese Economic Review
    DOIs
    Publication statusAccepted/In press - 2016

    Fingerprint

    Initial public offerings
    Certification
    Underpricing
    Japan
    Banking relationships
    Institutional investors
    Subsidiaries
    Winner's curse
    Minorities
    Information rent
    Venture capital
    Lending
    Commercial banks
    Empirical evidence
    Bookbuilding
    Investors
    Incentives

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    @article{73a8462570394a5cae3b005a03b110ae,
    title = "The Certification Role Of Pre-IPO Banking Relationships: Evidence From IPO Underpricing in Japan",
    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.",
    author = "Yoshiaki Ogura",
    year = "2016",
    doi = "10.1111/jere.12082",
    language = "English",
    journal = "Japanese Economic Review",
    issn = "1352-4739",
    publisher = "Wiley-Blackwell",

    }

    TY - JOUR

    T1 - The Certification Role Of Pre-IPO Banking Relationships

    T2 - Evidence From IPO Underpricing in Japan

    AU - Ogura, Yoshiaki

    PY - 2016

    Y1 - 2016

    N2 - 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.

    AB - 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.

    UR - http://www.scopus.com/inward/record.url?scp=84963526769&partnerID=8YFLogxK

    UR - http://www.scopus.com/inward/citedby.url?scp=84963526769&partnerID=8YFLogxK

    U2 - 10.1111/jere.12082

    DO - 10.1111/jere.12082

    M3 - Article

    AN - SCOPUS:84963526769

    JO - Japanese Economic Review

    JF - Japanese Economic Review

    SN - 1352-4739

    ER -