Study On Underwriter Network And Its Role In IPO

Securities market system is becoming more market-oriented and less affected by administrative intervention,while the role of underwriting institutions is increasingly important.Underwriting network is a joint investment form among peer underwriters,sharing information and resources but diversifying risk.This paper aims to study the structural characteristics of Chinese underwriter network,and how these centralities of underwriters affect the IPOs.In this paper,1660 IPO events from January 1,2005 to December 31,2015 in the Shanghai and Shenzhen A-share markets have been selected as samples,including corporations applying for listing and successful listing,with 94 underwriting institutions as book managers and co-managers in syndicates.The research on structural characteristics of Chinese underwriter network is based on social network analysis and UCINET software,and how the underwriter network characteristics affect the IPO events is analyzed by empirical tests.Results are:(1)Underwriter network presents the core-periphery characteristic with a small network density which declines year by year,and the whole structure is relatively loose.(2)The roles of degree,betweenness and eigenvector centrality of underwriter network have no impact on the probability of enterprises' passing IPO verification.With underwriters having low reputation,the effects of centralities on the probability of enterprises' passing IPO verification are significantly negative.(3)The centralities of underwriter network are positively associated with IPO underpricing.When underwriters have low reputation,the impacts are more powerful;while underwriters with high reputation,the impacts become weakened.Since the roles of centralities on IPO underpricing is influenced by listing boards and changes in IPO reform policy,the conclusion is only verified in subsamples of firms listed on SME and firms listed before IPO reform during 2005 to 2012.(4)The role of degree centrality on performance of IPO firms is significantly negative,while betweenness and eigenvector centrality have no impact on performance of IPO firms.Under the premise of underwriters having low reputation,the network centralities are negatively associated with performance of IPO firms and the network effects are more powerful.