A Model of the IPO Underwriting Contract

Authors

  • Oya Altınkılıç University of Maryland
  • Suman Banerjee Stevens Institute of Technology image/svg+xml
  • Robert S. Hansen Tulane University image/svg+xml
  • Christina Zhang California State University, Monterey Bay image/svg+xml

Keywords:

Accounting, Finance, institutional investors, underwriters, going public, initial public offerings, underpricing, investment banking

Abstract

We provide a reputable intermediaries model of IPO underwriting and pricing. Lead underwriters serve to secure a bargain between the IPO firm and bridge investors who supply the capital. Through a relationship with the IPO firm and bridge investors, the underwriter guarantees the firm’s performance, and monitors the firm directly, and indirectly through delegated monitoring by the bridge investors. Issuers pay for monitoring and the cost of holding through IPO underpricing. The model gives new understanding to IPO pricing and allocations and several anomalies reported in the literature.

References

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Published

2020-04-02

Issue

Vol. 20 No. 1 (2020)

Section

Articles

License

Please review our Copyright Notice.

How to Cite

A Model of the IPO Underwriting Contract. (2020). Journal of Accounting and Finance, 20(1). https://articlearchives.co/index.php/JAF/article/view/99