The study found a significant positive impact of underwriter reputation on first-day returns and long-term performance.
Authors
Parveen Siwach, National Institute of Food Technology Entrepreneurship and Management, Kundli, India; Amity University, Punjab, India.
Prasanth R. Kumar, National Institute of Food Technology Entrepreneurship and Management, Kundli, India; Amity University, Punjab, India.
Vikas Gupta, Assistant Professor, Jindal Global Business School, O.P. Jindal Global University, Sonipat, Haryana, India.
Summary
The purpose of the study is to determine the impact of underwriter reputation on shaping the short- and long-term success of small business IPOs. Uses IPO data from 2012 to 2020, three reputational proxies, and an event-time methodology to analyze firm performance through market-adjusted excess returns, cumulative abnormal returns, and buy-and-hold returns.
Similarly, to moderate general predispositions, the authors use calendar time methodology, the Fama-French three-factor model, and the Carhart four-factor model with high and low reputation groups. The study found a significant positive impact of underwriter reputation on first-day returns and long-term performance. Overall, the results suggest that, over the long term, Indian SME IPOs are overperforming on reputational signals.
In contrast, the calendar time method and the multifactor model indicate poor long-term performance of SME IPOs. To the best of the authors’ knowledge, this is the first study to examine the impact of underwriters’ reputation on firm performance using multiple reputational indicators using calendar time methodology and a multifactor model in an Indian SME IPO market.
Published in: Finance: Theory and Practice
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