Journal of Financial Economics Vol. 28 No. 1-2 1990
Borrowing relationships, intermediation, and the cost of issuing public securities
Abstract
This paper investigates how an established borrowing relationship affects the costs associated with initial public offerings of equity. Our model illustrates how the existence of a borrowing relationship reduces the ex ante uncertainty about the value of the issuing firm's equity in the secondary market. If underpricing is related to uncertainty, a borrowing relationship can reduce underpricing. Empirically, we find that, other things equal, IPOs of firms with previously established borrowing relationships are underpriced substantially less than other IPOs.
- DOI
- 10.1016/0304-405x(90)90051-z
- Volume
- 28
- Issue
- 1-2
- Pages
- 149-171
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref