Conflicts of Interest in the Underwriting of IPOs and Price Stabilization

Download or read book Conflicts of Interest in the Underwriting of IPOs and Price Stabilization written by Antonio Gledson De Carvalho and published by . This book was released on 2015 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: Banks that supply capital and simultaneously underwrite securities for the same clients may benefit themselves or their clients at the expenses of investors by overpricing securities. We investigate this issue by analyzing price stabilization and short-term returns of IPOs. Our analysis suggests that equity-conflicted underwriters overprice IPOs and use price stabilization to disguise overpricing. The same does not happen with loan-conflicted underwriters. We also show that the partial adjustment phenomenon may result from price stabilization, since it disappears after the stabilization is over.