The paper "Underwriter Reputation Damage and Post－IPO Performance: Evidence from IPO Fraud of Chinese Listed Companies", co-authored by Professor Xueyong ZHANG of the School of Finance and his doctoral student Qiuyue ZHANG, was recently published in "Journal of Financial Research" which is one of the CSSCI journals.
Abstract: Existing literature has shown that underwriter reputation has a certification function, but there is always controversy about the empirical evidence that whether underwriter reputation can certify IPO firms or not. Different from the general use of ranking, market share or other indirect proxies, this paper examines the underwriter reputation damage from a new perspective by using IPO fraud of Chinese listed companies. The empirical evidence shows that: (a) Firms going public hiring underwriters with clients reporting IPO fraud exhibited higher underpricing levels and lower long－term returns compared to the firms that hired underwriters without IPO clients reporting fraud in the same period; (b) Firms hiring underwriters after their corporate clients were caught IPO fraud exhibited higher underpricing levels and lower long－term returns compared to the firms hiring the same underwriters before their clients reporting fraud. (c) To tackle potential endogeneity problem, we adopt a difference－in－differences approach and find that our baseline results are still hold. This paper is of great significance for the mechanism of underwriter reputation damage.
Keywords: IPO Fraud; Underwriter Reputation Damage; IPO Performance; DID