Facoltà di scienze economiche

Conflicts of interest in initial public offerings

Pratobevera, Giuseppe ; Degeorge, François (Dir.)

Thèse de doctorat : Università della Svizzera italiana, 2018 ; 2018ECO003.

In my thesis I investigate the conflicts of interests between underwriters, issuers, and investors in initial public offerings (IPOs). I provide empirical evidence that conflicts of interest exist, affect the IPO process, and have real monetary costs for IPO issuers. The novel data, methodologies, and identification strategies used in this thesis allow answering questions so far unexplored by... Plus

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    Summary
    In my thesis I investigate the conflicts of interests between underwriters, issuers, and investors in initial public offerings (IPOs). I provide empirical evidence that conflicts of interest exist, affect the IPO process, and have real monetary costs for IPO issuers. The novel data, methodologies, and identification strategies used in this thesis allow answering questions so far unexplored by the existing literature. In Chapter I of my thesis, co-authored with François Degeorge, I investigate the conflicts of interest that may arise when the investment bank that underwrites the IPO also has an investment management arm. Using a novel hand-collected dataset of U.S. IPO allocations, I implement a Regression Discontinuity Design and find that underwriters underprice IPOs to benefit their affiliated funds at the expenses of IPO issuers. In Chapter II, co- authored with Tamara Nefedova, I analyze institutional investors' trading behavior in the IPO after-market. Using detailed trading data, I find that institutional investors are less likely to sell than buy through the lead underwriters, consistent with institutions hiding their sell trades from IPO underwriters.