Review of Quantitative Finance and Accounting

, Volume 37, Issue 4, pp 409–426

Underwriter reputation and underpricing: evidence from the Australian IPO market

  • William Dimovski
  • Simmala Philavanh
  • Robert Brooks
Original Research

DOI: 10.1007/s11156-010-0211-2

Cite this article as:
Dimovski, W., Philavanh, S. & Brooks, R. Rev Quant Finan Acc (2011) 37: 409. doi:10.1007/s11156-010-0211-2

Abstract

Dimovski and Brooks (J Intern Financ Mark Inst Money 14:267–280, 2004b) examined 358 Australian industrial and mining company initial public offerings (IPOs) from 1994 to 1999 to report that more money was left on the table by IPOs that engaged underwriters than those that did not engage underwriters. Loughran and Ritter (Autumn 5–37, 2004) suggested that the negative relation between underwriter reputation and underpricing has reversed in the 1990s with U.S. IPOs. The main purpose of this paper is to study the relationship between underwriter reputation and underpricing in terms of Australian IPO data. In this paper, we use 380 Australian industrial company IPOs from 1994 to 2004 to perform the empirical study. Our results suggest that more prestigious underwriters are associated with a higher level of underpricing. Other variables that are found to be significant in explaining the level of IPO underpricing are market sentiment, share options, total capital raised and underwriter options.

Keywords

IPOs Underpricing Underwriting 

JEL Classification

G15 

Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  • William Dimovski
    • 1
  • Simmala Philavanh
    • 1
  • Robert Brooks
    • 2
  1. 1.School of Accounting, Economics and FinanceDeakin UniversityWaurn Ponds, GeelongAustralia
  2. 2.Department of Econometrics and Business StatisticsMonash UniversityNarre WarrenAustralia

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