Boards, underwriter reputation, and underpricing in IPO markets: an investigation of the effects of the directors’ human and social capital

We investigated how firms obtain the endorsement of reputable underwriters during IPOs. Since investment banks want to avoid associating themselves with low-quality organizations, IPO firms must demonstrate their value through signals; among them, we looked at the human and social capitals represented in the board. While both factors are known as determinants of underpricing, research on their role in obtaining the endorsement of underwriters is limited. To verify our hypotheses we studied 141 IPOs in the Italian stock market, which showed that the board’s social capital, but not human capital, is a significant antecedent of the endorsement of reputable underwriters.