Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154826
Authors: 
Ber, Hedva
Yafeh, Yishay
Yosha, Oved
Year of Publication: 
1997
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 63.1997
Abstract: 
In this paper we provide evidence that the post-issue accounting profitability of firms underwritten by bank affiliated underwriters that are also borrowers from the same bank in the IPO (Initial Public Offerings) year is significantly better than average, but that the stock price performance of these firms during the first year following the IPO is lower than average. Furthermore, the stock price performance of firms whose equity is purchased by an investment fund that is affiliated with the underwriting and lending bank is even lower. We interpret this as evidence that universal banks use their superior information regarding underwritten firms to float the cherries, not the lemons, but that the combination of bank lending, underwriting, and investment fund management results in conflict of interest. Bank managed funds pay too much for bank underwritten IPOs at the expense of the investors in the funds.
Subjects: 
Investment banking
Universal banking
Conflict of interest
Corporate governance
Bank debt
Bank monitoring
Initial public offerings
IPO underperformance
IPO underpricing
Large shareholders
Bank underwriting
Investment funds
JEL: 
G1
G21
G23
G24
G32
Document Type: 
Working Paper

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