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THE EFFECTS OF BANKING RELATIONSHIP, LEGAL ORIGIN, PRIVATE EQUITY AND LEAD MANAGERS ON THE PERFORMANCE OF WEST AFRICAN IPO FIRMS

Authors

  • BRUCE HEARN

    Corresponding author
    1. School of Management, Ken-Edwards Building, University of Leicester, Leicester, United Kingdom
      School of Management, Ken-Edwards Building, University of Leicester, Leicester, United Kingdom, LE1 7RH. Tel: 44(0)116 252 5141. E-mail: bruce.hearn@le.ac.uk
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  • The author is grateful for the useful comments and advice from Igor Filatotchev, Jenifer Piesse, Roger Strange and Ron Smith in completing this work. He would also like to thank the participants of the 37th Academy of International Business – UK and Ireland Chapter conference hosted by Trinity College Dublin, 2010 for useful comments. He is also grateful to Olive Kone for assistance in the translation of BRVM (Cote d'Ivoire) and Cameroonian prospectuses and Lilian de Menezes for Portuguese to English translation of Cape Verde Islands prospectuses.

School of Management, Ken-Edwards Building, University of Leicester, Leicester, United Kingdom, LE1 7RH. Tel: 44(0)116 252 5141. E-mail: bruce.hearn@le.ac.uk

Abstract

This paper examines the performance effects arising from initial primary offering (IPO) firms retaining their existing bank as a lead manager together with the effects of foreign and domestic lead managers, corporate insiders and private equity investors across West Africa. Using a unique and comprehensive sample of 37 locally listed IPO firm's from across West Africa, I find evidence of a considerable reduction in underpricing and costs of equity in firms listing on civil code as opposed to common law markets. Furthermore, I find evidence that firms employing their existing bank as lead manager have higher costs of equity while the employment of a foreign as opposed to domestic lead manager imparts a reduction in underpricing and cost of equity.

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