The Networking Function of Investment Banks: Evidence from Private Investments in Public Equity

The Value of Reputation: Evidence from Equity Underwriting

“…32. The findings of Huang and Zhang (2011) build on the findings of Gao and Ritter (2010) that in SEOs many issuing firms value the marketing efforts of underwriters, as evidenced by their selection of higher cost (in terms of underwriter fees) fully marketed offers over lower cost accelerated offers. In the context of private investments in public equity, Huang, Shangguan, and Zhang (2008) also provide evidence that investment banks with wider networks help issuers attract investors.…”

Comovement and investment banking networks

“…These relations appear to generate unique networks of investors who tend to remain loyal to their primary investment bank (e.g., Binay, Gatchev, and Pirinsky, 2007;Gondat-Larralde and James, 2008;Huang, Shangguan, and Zhang, 2008). This suggests that buy-side firms self-segment through affiliation with particular investment banks, much like a social network.…”