Do IPO Underwriting Relationships Affect The Subsequent Lending Business?

This paper investigates the relationship between IPO underwriting and subsequent lending business. The authors find that if a lender underwrites the IPO of a firm, it is more likely for this lender to provide the IPO firm with future loans and to charge higher interest rate, compared to a lender lacking such an underwriting relationship. The results do not change significantly when the sample is restricted to firms that have exclusive post-IPO loans. However, there is no significant difference on the above findings whether the underwriters are commercial banks or not. Thus, for both commercial banks and investment banks, IPO underwriting benefits their subsequent lending business.