We provide evidence that firms attempting IPOs condition offer terms and the decision whether to carry through with an offering on the experience of their primary market contemporaries. Moreover, while initial returns and IPO volume are positively correlated in the aggregate, the correlation is negative among contemporaneous offerings subject to a common valuation factor. Our findings are consistent with investment banks implicitly bundling offerings subject to a common valuation factor to achieve more equitable internalization of information production costs and thereby preventing coordination failures in primary equity markets.

meetings in San Antonio, TX for helpful comments and suggestions. We remain responsible for any errors. Wanna Dance? How Firms and Underwriters Choose Each Other How do equity issuing firms and underwriters get together? We develop a theoretical model founded on the idea that issuers and underwriters associate by mutual choice. Underwriters look to the quality of the issuers who may wish to employ their services and issuers look to the abilities of the underwriters they consider employing. Our approach contrasts to the conventional view of one-sided choice established in the existing literature. Our model suggests that issuers and underwriters will associate with different partners for subsequent offerings if changes in issuer quality and/or underwriter reputation are large enough. Our empirical finding that issuers who experience a relative reduction in quality from IPO to SEO switch to lower reputation underwriters for SEO offerings provides especially convincing support for this

Finance and Initial Public Offerings, participants at the Second EVI Conference on Entrepreneurship, Venture Capital, and Initial

This paper shows that the structure of the syndicate affects the spread in addition to the borrower’s characteristics. Because the lead bank is the principal syndicate member collecting information about the borrower, there is an information asymmetry within the lending syndicate that leads to moral hazard and/or adverse selection problems, thereby, impacting the loan spread. Consequently, the share retained by the lead bank can help to mitigate these problems. However, the observed relationship between syndicate structure and the loan spread is influenced, not only by information asymmetry, but also by diversification considerations. I use an instrumental variables approach to separate these two effects. By combining loan information with novel data on default correlations, I construct a direct measure of the risk-based loan spread premium required by the lead bank. This variable exogenously affects the diversification of the lead bank and has no direct effect on information asymmetry within a syndicate. The main results are that informational frictions between the lead and participant banks have an important economic impact on the spread, and an increase in the size of the lead bank's share causes a reduction in the loan spread. To the best of my knowledge, this is the first paper that addresses the endogenous relationship between loan spread and syndicate structure.

Despite the importance of investment syndicates for the Venture Capital (VC) industry to function, surprisingly little is known about the motives for syndication. In this study, I build on Entrepreneurial Finance studies that present uncertainty and risk associated with the investment as the main drivers of syndication. I then examine two important but less emphasized factors that affect syndication strategies: characteristics of the social structure and position of the actor in the social structure. I conceptualize the VC industry syndication network as a social exchange network and argue that actors accumulate social debts and assets as they receive syndicate invitations and initiate syndicates. From this, I primarily claim that the syndication history of a VC firm as well as the balance of his accumulated social liabilities and assets affects the likelihood of initiating syndicates. By analyzing syndication patterns in the US VC industry from early 1970s until 2004, I show that VC firms with net social liabilities, that is, VC firms that have received more syndicate invitations than they have initiated, are more likely to initiate a syndicate. 1

and the Securities and Exchange Commission for helpful comments. The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees. The views expressed herein are those of the authors and do not necessarily reflect the views of the Commission or the authors ’ former colleagues upon the staff of the Commission. All errors are our own responsibility. Who Receives IPO Allocations? An Analysis of “Regular ” Investors We analyze 1.56 million account allocations in a sample of 265 initial public offerings (IPOs) to investigate the importance of on-going relationships between investors and underwriters. We find a sizable set of both institutional and retail investors who receive frequent allocations in IPOs. These regular investors receive greater monetary first-day gains, but lower average returns than other investors. This suggests that underwriters require regular investors to participate in weak offerings, but compensate them with continued access to underpriced shares. We develop measures of the reliance on regular investors in IPOs and investigate its determinants and consequences. Inconsistent with the predictions of bookbuilding models, we find no clear relationship between these measures and underpricing of

Why are firms that raise more financing worth more?

Abstract: Using a novel dataset of worldwide venture capital deals, we show that geographical and institutional distances shape investor decisions. Venture capitalists invest primarily in companies located in their home country. When crossing borders, they are much more likely to invest in companies in geographically and institutionally proximate countries than in distant countries. These results indicate that information asymmetry, monitoring and contract costs faced by foreign and more distant venture capital investors are crucial. Our findings suggest that these costs are mitigated when foreign venture capital investors syndicate with local partners from the country of the portfolio company. However, such syndication may give rise to new incentive problems and information asymmetries between the syndicate partners. Our results indicate that these problems are reduced if the syndicate is based on previous relationships between the participating venture capital investors. This

Abstract: Using a new dataset on worldwide private equity deals we show that physical distance considerably shapes the geographical investment patterns of these investors. However, the negative impact of long distances on private equity investors ’ funding decisions may be mitigated when far away investors syndicate with local partners from the recipients ’ countries. In particular, inexperienced distant private equity financiers might profit from the know-how and local presence of veteran investors when they do joint deals. Syndication between foreign and local investors seems to be particularly strong in countries with developed local private equity industries. Moreover, we demonstrate that small deals are more strongly discouraged by long distances than large ones.

We investigate the influence of loan and syndicate characteristics and information disclosure and legal environment factors on the arrangement timetable of bank loan syndications (measured as the time elapsed from the launching until the completion of the deal) from 68 countries over the 1992-2006 period. Employing accelerated failure time models from survival analysis methodology, we find that loan, syndicate, legal environment and information disclosure characteristics which reduce agency problems related to syndication reduce the arrangement timetable. Among the country level characteristics, information disclosure which reduces moral hazard due to informational frictions between syndicate members appears to be the most important driver of a faster deal arrangement timetable, while better creditor rights protection increase the arrangement timetable, consistently with recontracting risk issues.