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The aim is to explain certain disclosure and other obligations of municipal securities dealers when they act as underwriters to municipal securities issuers, as contained in a Municipal Securities Rulemaking Board interpretive notice regarding MSRB Rule G‐17, approved by the Securities and Exchange Commission on May 4, 2012.

The paper explains the basic fair dealing principle; required disclosure by an underwriter; timing, manner, acknowledgement, and substance of disclosures; guidance concerning the role and compensation of the underwriter; disclosures of other conflicts; disclosures required in the case of complex financing structures; guidance concerning underwriter compensation and new issuance pricing; requirements for underwriters to honor retail order periods; and guidance on dealer payments to issuer personnel.

Although most underwriters have always viewed themselves as having a duty of fair dealing to municipal issuers, the MSRB's notice will require underwriters to formalize their procedures. Underwriters will have to develop mandatory disclosures, checklists of potential conflict disclosures, and procedures for receiving written acknowledgments. They will need to rethink how they approach complex financings.

The paper provides practical guidance from experienced securities lawyers.

Many researchers suggest that investment bankers underprice IPOs. However, from 1989 to 1996, all Japanese IPOs were auctioned, reducing the role of underwriters. Initial returns of Japanese price-competitive IPOs are not found lower than underwriter-priced U.S. IPOs. Issue size, firm size, general market movements, insider sales levels, and underwriter quality are not highly related to initial returns under price-competitive auctions. However, there appears to be a strong partial adjustment phenomenon. Thus, price-competitive auctions did not result in significantly lower initial returns, but did reduce the impacts of many traditional variables found to significantly affect initial returns in U.S. underwriter-priced IPOs.

Economic theory posits a universal sociocultural orientation toward pricing complicated only by systematic cognitive biases. While institutional and organizational theorists have challenged the purported homogeneity of market logics, they have not linked market heterogeneity to price outcomes. If market logics are internally complex with multiple orientations toward pricing, skilled actors should be able to influence prices through market logics. This study utilizes qualitative analysis of interview data with a stratified random sample (75 percent response rate) of key participants to examine how investment banks (underwriters) instantiate a hybrid market logic in the Initial Public Offering (IPO) market. Underwriters exploit their status position to promulgate IPO pricing methods contradicting neoclassical rationality, behavioral models of pricing, and the underwriters’ own calculative mode of behavior. They successfully create this hybrid logic for issuers while hiding the nature of their market power through deceptive use of vocabulary from the market logic itself. Hence, the internal complexity of market logics directly impacts financial prices, with skilled actors achieving superior outcomes. This study concludes with an assessment of the implications for price theory, developing propositions to guide future research on market logics and pricing.

Prior research underscores the critical role of prestigious underwriters in shaping the success of the initial public offering (IPO) process, particularly for young firms that do not have much of a track record. Recent scholarly work has shown that the likelihood of a start-up securing a lead prestigious underwriter is influenced by its ability to provide important signals of organizational legitimacy, as conveyed in the employment experiences of the firm's top management team. Building further on theories of organizational attention and decision making, this chapter seeks to examine whether lead prestigious underwriters also consider different types of signals of organizational legitimacy that might be suggested by the existence of ties between young firms and corporate venture capital (CVC) investors.Analysis of 1830 IPOs during 1990–1999 indicates that having a tie to CVC investor provides added legitimacy value over that provided by independent venture capital investors alone. Further analysis of 315 IPOs affiliated with CVC investors suggests that prestigious underwriters pay attention primarily to endorsement-rather than resource-related signals of legitimacy when it comes to CVC ties, and that they pay more attention to investment screening prominence than to business management prominence when it comes to endorsement legitimacy. We also found that prestigious underwriters pay more attention to signals of IPO legitimacy provided by CVC investment in IPO markets that are hot than those that are cold. Our findings provide important theoretical extensions to the study of the certification value of interorganizational affiliations and its impact on IPO success.

Economic theory posits a universal sociocultural orientation toward pricing complicated only by systematic cognitive biases. While institutional and organizational theorists have challenged the purported homogeneity of market logics, they have not linked market heterogeneity to price outcomes. If market logics are internally complex with multiple orientations toward pricing, skilled actors should be able to influence prices through market logics. This study utilizes qualitative analysis of interview data with a stratified random sample (75 percent response rate) of key participants to examine how investment banks (underwriters) instantiate a hybrid market logic in the Initial Public Offering (IPO) market. Underwriters exploit their status position to promulgate IPO pricing methods contradicting neoclassical rationality, behavioral models of pricing, and the underwriters’ own calculative mode of behavior. They successfully create this hybrid logic for issuers while hiding the nature of their market power through deceptive use of vocabulary from the market logic itself. Hence, the internal complexity of market logics directly impacts financial prices, with skilled actors achieving superior outcomes. This study concludes with an assessment of the implications for price theory, developing propositions to guide future research on market logics and pricing.

We study the relationship between underwriter prestige, family control, and IPO underpricing in an international setting. Data are collected for 5,789 firms that went public across twenty‐five countries between 1995 and 2002. We find that non‐penny‐stock and non‐U.S. IPOs from countries where firms are predominately family‐controlled benefit from associations with well‐known investment bankers; i.e., these firms are less underpriced than similar firms from countries with a low level of family control. At the same time, our findings support prior evidence that suggests that underwriter prestige is positively related to underpricing in the U.S. IPO market. Family‐controlled firms should consider the findings of this study, which identifies factors that are associated with more successful IPO outcomes.

The purpose of this paper is to relate the fees paid to IPO underwriters to the nature and quality of the services they provide.

Controlling for the characteristics of the firm going public, the risk associated with the offering, and the reputation of the underwriter, the authors study on a sample of Italian IPOs whether a formal commitment by underwriters to provide ancillary services allows them to charge higher fees.

The authors document that asking underwriters to stabilize stock price is costly to the issuer, while to support liquidity is not. The authors’ also show that underwriters stabilize IPOs that really need it, whereas the provision of liquidity support does not seem to be always aligned with the issuer’s interest.

Investigating the Italian underwriting market is instructive for two main reasons. First, the institutional setting in IPOs is similar to most continental European countries, but significantly different from the US market. For instance, allocation policies in US IPOs are discretionary for both retail and institutional investors, while in Europe shares cannot be discretionarily allocated to retail investors. Second, the Italian market offers the opportunity to study the going-public decision outside the typical Anglo-Saxon financial systems. This is of interest because while both the UK and the USA have well-developed equity markets and a related industry of financial intermediation centered on providing equity, our analysis sheds light on financial intermediation of IPOs in a bank-centered system.

The purpose of this study is to examine the influence of underwriter reputation on the valuation of Malaysian initial public offerings (IPOs).

This study employed cross-sectional multiple regression models to analyse the relationship between underwriter reputation and IPO valuation that included 466 IPOs listed on Bursa Malaysia from 2000 to 2017.

The results revealed that underwriter reputation had a significant negative association with IPO valuation. Firms that engaged the services of reputable underwriters had their IPO offer prices set lower than the intrinsic values during the listing. After incorporating firms' size, this study found a positive relationship between underwriter reputation and IPO valuation. Big firms (high quality) hired reputable underwriters for certification purposes as issuers were aware that the cost of hiring a reputable underwriter would be justified by increased transparency after listing. Therefore, firms that engaged reputable underwriters had approximately fair values since issuers assumed that the price would be close to the intrinsic value following enhanced transparency post-listing.

Future studies should focus on other non-financial factors, such as auditor reputation.

The present study provides new insights into the certification role of underwriters in valuing IPOs in the Malaysian market.

The purpose of this paper is to examine the certification and monitoring motivations of third-party underwriting and its effects on credit spreads and earnings management of bank issuers.

Ordinary least squares is used to examine the certification and monitoring effects of third-party underwriting. Furthermore, the Heckman two-stage estimation method is used in controlling the endogeneity of sample selection.

The authors find that financial bonds underwritten by third-party underwriters bear lower credit spreads due to their credibly ex ante certification and effectively ex post monitoring compared with self-underwriting. Moreover, the certification of third-party underwriters can help to select good quality bond issuers with lower earnings management, and the monitoring function also plays an essential role in constraining the behavior of earnings management after the bond issues.

The findings in this study suggest that underwriting types (third-party underwriting) will affect financial bond yields and bank issuers’ earnings management.

On the one hand, the authors should encourage third-party underwriters to actively promote the certification and monitoring functions. For example, given commercial banks the chance to be underwriters when the bond issuers are investment banks, which is not allowed now in China’s financial bond market. On the other hand, the authors should cut off the quid pro quo relations within third-party underwriting because such relations will reduce the certification and monitoring effects of third-party underwriters.

This is the first study to distinguish the certification and monitoring effects by using unique data from China’s financial bond market. And the authors further investigate the adverse effects of quid pro quo relations (hiring each other as lead underwriters) on the certification and monitoring effects of third-party underwriters.

The purpose of the research is to study how Chief Executive Officer’s (CEO’s) ownership, CEO’s structural and expertise power and underwriters’ reputation affect the initial public offering (IPO) lockup period.

The study uses the multivariate regression method to test the hypothesis on a sample of 1,071 US IPOs, which comprise 80 per cent of the total population of IPOs over the 1998-2002 period.

It was found that CEO equity ownership had a direct positive impact and two indicators of CEO positional power (CEO duality, founder status) and underwriter reputation had a direct negative impact on the length of the lockup period that results from IPO negotiations between the issuing firm and the underwriter. It was also found that underwriter reputation negatively moderates the impact of equity ownership (likely due to a substitution effect) and positively moderates the impact of CEO duality on lockup period length (by offsetting the impact of CEO positional power).

Previous studies have exclusively studied the affect of economic factors on IPO lockup. This paper extends the extant literature by studying the insider’s characteristics like CEO’s power and underwriter’s reputation on IPO lockup periods.