Banking Relationships, Underwriting Reputation, and Underpricing of IPOs Convertible Bonds – Evidence from Taiwanese Listed Companies

• Main Authors: Bi-Chun Tseng, 曾碧君
• Other Authors: Hai-Chin Yu
• Format: Others
• Language: zh-TW
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/40243096073616106706

碩士 === 中原大學 === 國際貿易研究所 === 94 === This study examines whether banking relationships, underwriter reputation, issuing firm characteristics, and IPO of convertible bonds characteristics influence the underpricing of IPO of convertibles bonds issued by Taiwanese listed companies. This study tests whether banking relationships established before the firm’s convertible bonds IPO ameliorates asymmetric information problems due to certification effect and the issuing firms face lower convertible bonds IPO underpricing, or when investors realize that such a conflict of interest might exist and then the issuing firms face higher convertible bonds IPO underpricing. This study finds the pricing of the convertible bonds IPO underwritten by commercial banks are higher than similar convertible bonds IPO underwritten by securities firms. When the underwriters are the commercial banks, it is easy for issuing firms to be subjected to conflict of interest and obtain certification effect. When the underwriters are the commercial banks that lend to issuing firms, investors perceive that conflict of interest might exist and conflict of interest outweighs certification effect and investors will adjust the price they are willing to pay for convertible bonds in a downward direction. The underpricing increases. The commercial bank loan influences underpricing of IPO of convertibles bonds. If the bank loan is much more and underwriters are the commercial banks that lend to issuing firms, the issuing firms face higher convertible bonds IPO underpricing. High underwriter reputation sends the messages that issuing firms are high quality, so underwriter reputation certainty can decrease the underpricing of IPO of convertibles bonds, however, only for overpricing convertible bonds IPO having significant effect.