재무연구 제 권 호 (2009년 5월)
Asian Review of Financial Research, Vol., No..
pp.82~122
pp.82~122
Reciprocity in Syndicate Participation and Issuer’s Welfare : Evidence from Initial Public Offerings
Cheolwoo Lee Accountancy, Finance, and Information Systems Department, College of Business, Ferris State University, Big Rapids, MI 49307-2284, USA
Jin Q. Jeon Department of Economics, Finance and Legal Studies, Culverhouse College of Commerce & Business Administration, University of Alabama, Tuscaloosa, AL 35486-0224, USA
Bum J. Kim College of Business Administration Soongsil University, Seoul, 156-743, Korea
We examine whether syndicate participation is reciprocal and also whether such reciprocity is beneficial to issuers using 1043 IPOs from January 1997 to June 2002. Reciprocal syndicates appear to make a lower level of price revision (lower information production), which lowers the amount of capital to be raised through going public, and to provide less analyst coverage by the lead underwriter. We interpret the lower price revision level as an intention to exert less marketing efforts and such intention is in part embodied in the form of less analyst coverage by the lead underwriter in the aftermarket. Also, reciprocal syndicates do not provide greater certification services in order to reduce underpricing. In addition, we find that reciprocal syndicates charge higher, or at least not lower, underwriting spreads than non-reciprocal syndicates. Evidence overall shows that reciprocity is not beneficial to issuers but rather it appears to be established and maintained for the benefit of underwriters.
Cheolwoo Lee
Jin Q. Jeon
Bum J. Kim
We examine whether syndicate participation is reciprocal and also whether such reciprocity is beneficial to issuers using 1043 IPOs from January 1997 to June 2002. Reciprocal syndicates appear to make a lower level of price revision (lower information production), which lowers the amount of capital to be raised through going public, and to provide less analyst coverage by the lead underwriter. We interpret the lower price revision level as an intention to exert less marketing efforts and such intention is in part embodied in the form of less analyst coverage by the lead underwriter in the aftermarket. Also, reciprocal syndicates do not provide greater certification services in order to reduce underpricing. In addition, we find that reciprocal syndicates charge higher, or at least not lower, underwriting spreads than non-reciprocal syndicates. Evidence overall shows that reciprocity is not beneficial to issuers but rather it appears to be established and maintained for the benefit of underwriters.
