Partner Similarity and Syndicate Formation: Evidence Related to the Korean IPO Market

This paper examines how syndicates of initial public offerings (IPOs) are formed in the Korean market from the view of similarity-based associations by studying IPOs from 2002 and 2008. The results indicate that book managers are inclined to invite underwriters who have similar reputations and statuses as syndicate members, suggesting that similarity-based homophily among underwriters plays a role in forming the syndicates in the Korean IPO market. Furthermore, book managers with a high reputation and status are less likely to invite other underwriters whereas potential underwriters of high status are more likely to be invited in the syndicate. The syndicate formation of IPOs in the Korean market is also affected by existing ties among underwriters, the industry’s market volatility, and issuing firms’uncertainty.