Corruption, Growth, Panel data,

No abstract

PurposeThe purpose of this paper is to examine the relationship between underwriter reputation and initial public offerings (IPOs) initial returns over a 24‐year period, from 1980 to 2003.Design/methodology/approachTwo‐stage least‐squares regression analysis on data from IPOs offered from 1980 to 2003 is used to determine how the choice of IPO underwriter is related to initial returns when considering reputation as an endogenous variable.FindingsThis study shows, consistent with prior literature, that underwriter reputation is statistically significantly negatively related to initial returns from 1980 to 1991 and statistically significantly positively related to initial returns from 1992 to 2003, when reputation is taken as an exogenous variable. When considering the choice of the reputation of underwriter as endogenous to characteristics of the firm, the reputation of an underwriter is significantly positively related to IPO initial returns for 1980 to 2003 and 1992 to 2003 and insignificantly related, for 1980 to 1991.Originality/valueThis study adds value to finance literature in that it extends the research on the relationship between IPO initial returns and underwriter reputation. It also furthers the existing research on IPO anomalies and notes characteristics in this field of financial markets that may be important to both issuers and investment banks.

There is evidence in the literature that corruption lowers the level of investment and the productivity of capital stock in an economy. This paper extends the literature by presenting evidence that investment allocation decisions are affected in a significant way by corruption. The most commonly used measure of the efficiency of overall investment in an economy is the incremental capital output ratio (ICOR), measured by the ratio of gross investment to the change in the gross domestic product. The inverse of the ICOR measures the productivity of investment in an economy. When the known explanatory factors for inter-country variation in the ICOR are taken into account, the incidence of corruption has a statistically significant negative effect on the efficiency of investment for a panel of 90-140 countries during 1995-2004. The strength of this effect increases with the incidence of corruption. The econometric model used is robust to unobserved and time-invariant country fixed effects, feedbacks from current stochastic shocks to subsequent values of the determinants of investment efficiency, and the persistence of efficiency. Copyright 2007 Blackwell Publishing Ltd..