Assortative Matching and Reputation in the Market for First Issues

Using a tractable structural model of the matching equilibrium between underwriters and equity-issuing firms, we study the determinants of value in underwriter–firm relationships. Our estimates imply that high underwriter prestige is associated with 5.3%–14.1% greater equilibrium surplus. According to the structural model, high prestige exhibits a significant certification effect throughout the sample (1985–2010), but there is also a countervailing effect of underwriter prestige that reflects subscriber preferences for more underpricing. Consistent with trading off profits from issuers and subscribers, high-prestige underwriters underprice more in hot markets when rents to catering to subscribers are greatest. This paper was accepted by Gustavo Manso, finance.

• 저널Management Science · 67(4) · 2049–2074
• 토픽Corporate Finance and Governance · Accounting
• DOI10.1287/mnsc.2020.3594
• 저자Oktay Akkus, J. Anthony Cookson, Alı Hortaçsu