What Do Investment Banks Truly Bring to the Table?

Abstract

This paper investigates the role of intermediaries in the initial public offering (IPO) process. In the U.S. market, investment banks have traditionally been involved in a firm-commitment or best-efforts underwriting capacity. However, in the Australian IPO market, investment banks are increasingly being named in association with new issues in diverse roles such as issue managers, sponsoring brokers and corporate advisers. Using a sample of 468 IPOs over the 1996 to mid-2006 period, we examine the influence of investment banks across these different engagements. In support of the signalling and information production roles of intermediaries, we find that issuers choosing high intermediary in..