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Single versus multiple banking: lessons from initial public offerings

Falconieri, S. & Bennouri, M. (2015). Single versus multiple banking: lessons from initial public offerings. The European Journal of Finance, doi: 10.1080/1351847X.2015.1053149


A vast research in banking addresses the question of the costs and benefits of multiple bank relationships versus a single bank relationship. Although no clear-cutting conclusion is reached, several contributions suggest that multiple bank relationships might lead to a suboptimal level of monitoring, compared to a single bank relationship, as a result of free riding and coordination problems. We take a novel approach to tackle this research question, by looking at the role, if any, played by the number of lending relationships in initial public offerings (IPOs). We look at the short-term performances of IPOs as measured by underpricing and find that firms that go public with multiple bank relationships exhibit more underpricing than those that go public with a single bank relationship. This finding is independent of the number of bank relationships and/or whether any of the lending banks also acts as underwriter in the offering. We interpret our results as suggesting that the market attributes a weaker certification role to multiple bank relationships because of their less effective monitoring of IPO firms.

Publication Type: Article
Additional Information: This is an Accepted Manuscript of an article published by Taylor & Francis in The European Journal of Finance on 17 Jun 2015, available online:
Publisher Keywords: initial public offerings, multiple banking, underpricing
Subjects: H Social Sciences > HG Finance
Departments: Bayes Business School > Finance
Text - Accepted Version
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