Financial intermediaries are known to have access to privileged information on firm value, potentially providing valuable services by revealing it to uninformed investors. An important issue that arises is whether investment banks have an incentive to distort prices by communicating biased information on the firms they are underwriting in IPOs. Reputation acquisition may mitigate this problem since intermediaries can lose credibility by incorrectly evaluating the profitability of firms. We argue that the introduction of reputation may not suffice to eliminate misreporting altogether, allowing less talented intermediaries to profit from not revealing their private information to the market.

Investment Bank Reputation and Initial Public Offerings (IPOs)

PAVESI, Filippo;
2013-01-01

Abstract

Financial intermediaries are known to have access to privileged information on firm value, potentially providing valuable services by revealing it to uninformed investors. An important issue that arises is whether investment banks have an incentive to distort prices by communicating biased information on the firms they are underwriting in IPOs. Reputation acquisition may mitigate this problem since intermediaries can lose credibility by incorrectly evaluating the profitability of firms. We argue that the introduction of reputation may not suffice to eliminate misreporting altogether, allowing less talented intermediaries to profit from not revealing their private information to the market.
2013
9788878474208
Investment Banks; reputation; Initial Public Offerings (IPOs); information revelation
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11562/645753
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus ND
  • ???jsp.display-item.citation.isi??? ND
social impact