Why Do Firms Switch Underwriters?

Posted: 30 Oct 2000

See all articles by Laurie Krigman

Laurie Krigman

Babson College

Kent L. Womack

University of Toronto - Rotman School of Management (Deceased)


During the mid-1990s, 30% of firms that completed a seasoned equity offering (SEO) within three years of their initial public offering (IPO) switched lead underwriter. This article provides evidence on why they switched. Contrary to predictions of prior research, there is little evidence that firms switch due to dissatisfaction with underwriter performance at the time of the IPO. A surprising result is that switchers' IPOs were significantly less underpriced than non-switchers' IPOs. However, switchers raised fewer proceeds than expected, compared to the mid-point of the filing range, while non-switchers raised significantly more proceeds. We find two main reasons for switching lead underwriter. Firms graduate to higher reputation underwriters, and they strategically buy additional and influential analyst coverage from the new lead underwriter. Survey results support these conclusions.

JEL Classification: G24, C25

Suggested Citation

Krigman, Laurie and Womack, Kent L., Why Do Firms Switch Underwriters?. Available at SSRN: https://ssrn.com/abstract=242041 or http://dx.doi.org/10.2139/ssrn.242041

Laurie Krigman (Contact Author)

Babson College ( email )

Finance Division
321 Tomasso Hall
Babson Park, MA 02457-0310
United States
781-239-4246 (Phone)

Kent L. Womack

University of Toronto - Rotman School of Management (Deceased)

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