Pricing of the initial public offerings and the underwriter reputation: Evidence from the Nordics

No Thumbnail Available
Journal Title
Journal ISSN
Volume Title
School of Business | Master's thesis
Degree programme
39 + 8
Purpose of the study In this thesis I examine the relationship between underwriter reputation and initial public offering (IPO) pricing in the Nordic stock markets. I consider post-IPO stock price performance for the initial first trading day return and 1-year subsequent market-adjusted stock performance. I use 4 different underwriter reputation proxies in the regression models. One of the proxies used has been slightly adjusted for the purposes of this study while the rest have been used in the prior literature. Finally, I use 4 control variables introduced by prior academic works to enhance the robustness of the regression results. Data and methodology A sample of 680 IPOs from Denmark, Finland, Iceland, Norway, and Sweden was collected from the SDC Platinum. I filtered the sample by selecting IPOs with issue date during 01/2000-12/2021. Additionally, I required key variables to be readily available for the sample IPOs. Further, I collect IPO league tables used in the reputation measures from SDC Platinum as well. Finally, I collect subsequent stock market data from the Datastream. Ordinary Least Squares (OLS) regression was used to analyze the data. Results I find that in the Nordic IPO sample of this study there is no statistically significant relationship between initial IPO underpricing and underwriter reputation. However, I find strong evidence that prestigious underwriters are more accurate in pricing of the IPOs. The regression results show that the absolute value of IPO underpricing and underwriter reputation proxies exhibit statistically significant relationship. Finally, I find that there is no statistically significant relationship between IPO 1-year aftermarket total return performance and the underwriter reputation.
Thesis advisor
Puttonen, Vesa
initial public offering, IPO, underpricing, underwriter reputation
Other note