Underwriter Reputation and Short-run IPO Returns: A Re-evaluation for an Emerging Market

Abstract

This study examines the effect of underwriter reputation on the initial-day IPO returns in an emerging market. It uses both a traditional and an extended model given the characteristics of the IPO market under analysis. The results from the traditional model indicate that underwriter reputation does not affect the initial day IPO returns. However, after controlling for factors that are important in determining the price of an IPO in an emerging market, a complex relationship between underwriter reputation measures and IPO returns is documented. Results in this paper indicate that it is not appropriate to extend the findings in the US to other markets without taking into account the unique characteristics of these markets.