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2010•Hainan Daxue xuebaoRequires access

Empirical Research on the Relationship between Underwriters' Reputation and IPO Firms' Quality in Sponsor System

Yin Heng

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Abstract

This paper discusses whether or not there is a positive relationship between underwriters' reputation and IPO firms' quality after the sponsor system comes into effect.In this paper,we use IPO firms' data from 2004 to 2006 to measure IPO firms' quality comprehensively by factor analysis and model to test if underwriters with high reputation are correlated to high quality IPO firms.Results show that the relationship between underwriters' reputation and the firms' quality has been distorted;and the practice of sponsor system did not lead underwriter reputation mechanism to function effectively.

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What this paper is about

This paper discusses whether or not there is a positive relationship between underwriters' reputation and IPO firms' quality after the sponsor system comes into effect.In this paper,we use IPO firms' data from 2004 to 2006 to measure IPO firms' quality comprehensively by factor analysis and model to test if underwriters with high reputation are correlated to high quality IPO firms.Results show that the relationship between underwriters' reputation and the firms' quality has been distorted;and the practice of sponsor system did not lead underwriter reputation mechanism to function effectively.

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Available abstract

This paper discusses whether or not there is a positive relationship between underwriters' reputation and IPO firms' quality after the sponsor system comes into effect.In this paper,we use IPO firms' data from 2004 to 2006 to measure IPO firms' quality comprehensively by factor analysis and model to test if underwriters with high reputation are correlated to high quality IPO firms.Results show that the relationship between underwriters' reputation and the firms' quality has been distorted;and the practice of sponsor system did not lead underwriter reputation mechanism to function effectively.

Key concepts: Underwriting, Reputation, Initial public offering, Business, Quality (philosophy), Accounting, Test (biology), Finance

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