Why local banking market concentration hinders IPOs and how it can work to issuers’ advantage

Kallias, Antonios ORCID: https://orcid.org/0000-0002-9431-7222, Kallias, Konstantinos, Guancheng, Lu and Zhang, Song 2021. Why local banking market concentration hinders IPOs and how it can work to issuers’ advantage. Finance Research Letters 43 , 101966. 10.1016/j.frl.2021.101966

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Abstract

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.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Publisher:	Elsevier
ISSN:	1544-6123
Date of First Compliant Deposit:	25 February 2021
Date of Acceptance:	9 February 2021
Last Modified:	06 Nov 2023 18:13
URI:	https://orca.cardiff.ac.uk/id/eprint/138924

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