An Empirical Study On The Impact Of Underwriter Reputation On IPO Long-term Performance

In the process of IPO, security underwriters play an important role of afinancial intermediation as information producer and certification agent.However, how can investors be able to ensure the reliability of the function thatunderwriters play as information producer and certification agent. In this case,the value of reputation is prominent.Reputation mechanism is the source toensure the reliability of the securities underwriter information producing. On theinitial public offering of the study includes three aspects:(1) IPO underpricing;(2) IPO long-term performance;(3) Hot issues. The long-term performance ofinitial public offering of new shares has been the focus in domestic and abroad.Based on the above two aspects, this thesis discusses the theory and empiricalrelationship between underwriter reputation and IPO long-term performance.In the background of reforming in issuing regime and non-tradable shares,we select223IPOs listed on small and medium enterprises board in the ShenzhenStock Exchange since January of2006to the December of2008as thesample.Based on the certification intermediation theory, We use the BHARapproach and regression approach to analysis of samples for the empirical study.We get the conclusions as followed.First, the IPO long-term weakness still exists after the series of reforming inthe China’s securities market. Second, underwriter reputation and the IPOlong-term performance is positively correlated. That is, the higher the reputationof the underwriters, the better of the IPO long-term performance. Third, inChina’s security market,the higher of the underwriting spreads of the issueenterprise,the worse of its new shares’ long-term performance.The enterprisewhich has established the inquiry mechanism is more easier to get the higherreputation underwriters’ cooperation and support, it’s long-term performance ofthe shares can be superrior to those have not established the inquiry mecanism.This paper analysis the impact of underwriter reputation on long-termperformance of the IPO in both theoretical and empirical, providing theoreticalsupport in reshaping our underwriter reputation and regulating the behavior of asecurities underwriter.