TY - JOUR
T1 - Why local banking market concentration hinders IPOs and how it can work to issuers’ advantage
AU - Kallias, Antonios
AU - Kallias, Konstantinos
AU - Lu, Guancheng
AU - Zhang, Song
PY - 2021/2/13
Y1 - 2021/2/13
N2 - General sample evidence conceals the influence of banking market structure on a fraction of IPO issuers with limited financing options: small non-venture-capital-backed firms (SNVC). Using U.S. county-level data, we reveal that concentrated banking markets contract IPO activity, as they cause SNVCs to incur high underpricing at listing. However, when the size of the local banks is small, both the time to IPO and underpricing decrease. Our evidence infers that, unless banks are organizationally capable of tapping into soft information, they generally use market power for rent extraction, which has important spillover effects on the IPO market.
AB - General sample evidence conceals the influence of banking market structure on a fraction of IPO issuers with limited financing options: small non-venture-capital-backed firms (SNVC). Using U.S. county-level data, we reveal that concentrated banking markets contract IPO activity, as they cause SNVCs to incur high underpricing at listing. However, when the size of the local banks is small, both the time to IPO and underpricing decrease. Our evidence infers that, unless banks are organizationally capable of tapping into soft information, they generally use market power for rent extraction, which has important spillover effects on the IPO market.
KW - initial public offerings
KW - banking market concentration
KW - soft information
KW - venture capital
UR - https://linkinghub.elsevier.com/retrieve/pii/S1544612321000477
U2 - 10.1016/j.frl.2021.101966
DO - 10.1016/j.frl.2021.101966
M3 - Article
SN - 1544-6123
JO - Finance Research Letters
JF - Finance Research Letters
M1 - 101966
ER -