This article provides a comprehensive examination of the time-series behavior of relationship banks around and during borrower distress. Relationship and outside loans have similar interest rates during distress and even 2 years prior to distress. Relative to outside loans in distress, relationship loans in distress have lower maturity. The fraction of bank lending given by relationship banks reduces during borrower distress. Overall, borrowers in distress do not derive benefits from relationship banks. These findings are inconsistent with models that suggest banks have an implicit commitment to help their borrowers in distress due to reputation concerns.

Using detailed bid prices from institutional investors for 474 IPOs in China from 2010 to 2012, we find that 62.07% of the bid prices cluster at integers. This phenomenon is more pronounced for IPO firms that are smaller or younger or that exhibit more volatile profitability. Furthermore, the percentage of integer bid prices decreases from 62.07% to 7.58% after a regulatory mandate that significantly reduces the valuation uncertainty of IPOs. Expecting a positive first-day return, institutional investors round the bid price upward to the nearest integer to increase their odds of share allocation. Consequently, the offer price increases and the post-issuance return decreases with the increasing fraction of integer bid prices. Overall, these results suggest that institutional investors, possibly constrained by cognitive resources, carry over heuristics to their bidding activities in IPOs.

Earlier research indicates that attracting pre-offer investor attention yields long-term benefits to an initial public offering (IPO) issuer. For investors with limited attention, we model a way in which firms may attract attention: through underpricing their IPO, and using the expected allocations of underpriced shares to induce investors to attend the road show and consider the offering. Our model generates a novel set of predictions regarding the relationship between initial returns and attention, retention, expansion, and the benefits of attention, plus the asymmetry of the relationship with attention. Consistent with our model, investors’ attention is positively related to both initial returns and the magnitude of price revision. The relationship between attention and underpricing is asymmetric, and stronger when ex ante uncertainty is greater. Our work has implications regarding direct listings, is consistent with partial adjustment to public information, explains the relative unpopularity of gray market/when-issued trading and predicts that, even if the JOBS Act leads to more active pre-IPO trading (through crowdinvesting/equity crowdfunding), underpricing will still occur.