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IPO Monitoring Effectiveness of External Investment Banks and IPO Insiders

Research in Finance

ISBN: 978-0-85724-541-0, eISBN: 978-0-85724-542-7

ISSN: 0196-3821

Publication date: 26 April 2011

Abstract

We investigate whether external investment banks or internal key IPO insiders such as company directors and officers, venture capitalists and institutions that hold an IPO's stock serve as effective monitors of IPO investments over the post-IPO period. We measure median changes in each group's holdings for the sample, finding large changes in these values during a long-run holding period. We find that long-run buy-and-hold returns (BHARs) are positively related to the lead investment bank underwriter reputation and the gross spread demonstrating that the external monitoring by investment banking firms increases the post-IPO firm's value. Holding the underwriter reputation constant, we find that the BHARs are positively related to the gross spread, also indicative of the value of monitoring by external investment banks.

Citation

Gordon, S.A.G. and Conover, J.A. (2011), "IPO Monitoring Effectiveness of External Investment Banks and IPO Insiders", Kensinger, J.W. (Ed.) Research in Finance (Research in Finance, Vol. 27), Emerald Group Publishing Limited, Bingley, pp. 165-194. https://doi.org/10.1108/S0196-3821(2011)0000027008

Publisher

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Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited