AN ANALYSIS OF THE UNDERWRITER SELECTION PROCESS FOR INITIAL PUBLIC OFFERINGS

This study extends previous research that shows prestigious underwrite rs avoided underwriting smaller, more speculative initial public offer ings (IPOs) during a post-SEC period, 1966-77. Estimating a logit mode l with a sample of 1,192 IPOs from 1977 to 1988, we evaluate the effec t of offering characteristics and prevailing market conditions on the probability a prestigious investment banker will underwrite an IPO. Si milar to previous studies, we find that prestigious underwriters avoid smaller, riskier issues. However, we also find stock market volatilit y, interest rate volatility, and the strength and profitability of the recent market for seasoned new issues to be important determinants of a prestigious underwriter's decision to underwrite an IPO.