Friends can help: The effects of relationship in the Chinese book-building process
Using detailed bidding information in Chinese IPO book-building process, we find that institutional investors who have a close relationship with the underwriter are more likely to participate in bidding and their bidding prices are higher, compared to other institutional investors. We also find that...
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| Main Authors: | , , , |
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| 格式: | text |
| 語言: | English |
| 出版: |
Institutional Knowledge at Singapore Management University
2023
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| 主題: | |
| 在線閱讀: | https://ink.library.smu.edu.sg/soa_research/2021 https://ink.library.smu.edu.sg/context/soa_research/article/3048/viewcontent/Friends_can_help.pdf |
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| 機構: | Singapore Management University |
| 語言: | English |
| 總結: | Using detailed bidding information in Chinese IPO book-building process, we find that institutional investors who have a close relationship with the underwriter are more likely to participate in bidding and their bidding prices are higher, compared to other institutional investors. We also find that related institutional investors bid higher when the underwriter is more likely to need or receive their support. Further analysis suggests that related institutional investors gain some benefits for their support to the underwriter, including receiving more shares in profitable IPOs, better timing their exit from the IPO in the open market, and receiving more optimistic earnings forecasts or stock recommendations from analysts of the underwriter. Regarding the economic consequence, we show that the underwriter is more likely to revise the offer price upward if related institutions bid higher. The evidence overall indicates the existence of relationship-driven bidding in the Chinese book-building process. |
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