Craig Dunbar

• Dunbar, C. G.; King, M. R., 2023, "Syndicate structure and IPO outcomes: The impact of underwriter roles and syndicate concentration", Journal of Corporate Finance, April 79: 102382 - 102382.
  Abstract: We examine how the composition and concentration of the underwriting syndicate affects outcomes in U.S. initial public offerings (IPOs) from 2002 to 2020. Most IPOs now feature “phantom” lead managers who underwrite significantly fewer shares than the lead-left bookrunner. We hypothesize that the phantom lead is the result of bargaining between issuers wanting greater information production and lead-left bookrunners preferring greater control of the IPO. Larger, less concentrated IPO syndicates feature more absolute price adjustments from the filing price during bookbuilding with downward revisions on average, and more analyst following post-IPO. The magnitude of price adjustments is greater when adding active joint leads relative to passive phantom leads. More concentrated IPOs feature higher first-day returns following positive price adjustments. Adding lead managers reduces the likelihood the lead-left will retain that role in follow-on equity offerings.

  Link(s) to publication:

  http://dx.doi.org/10.1016/j.jcorpfin.2023.102382

• Boeh Kevin, K.; Dunbar, C. G., 2021, "Raising capital after IPO withdrawal", Journal Of Corporate Finance, August 69: 102020 - 102020.
  Abstract: We document outcomes for withdrawn U.S IPOs (1,207) from 1998 to 2017. While the prior literature has studied post withdrawal IPO re-filings and M&A, we consider private capital raising as an alternative to these outcomes as well as a potential complement. We identify factors driving private capital raising post withdrawal. We also examine the impact of key regulatory changes enacted over our sample period intended to ease capital formation. We find no significant impact of Rule 155 but a positive effect the JOBS Act. Private capital raising post withdrawal complements second time IPO strategies but not M&A.

  Link(s) to publication:

  http://dx.doi.org/10.1016/j.jcorpfin.2021.102020

• Dunbar, C. G.; Li, Z. F.; Shi, Y. N., 2020, "CEO Risk-Taking Incentives and Corporate Social Responsibility", Journal of Corporate Finance, October 64
  Abstract: We examine how firms adjust CEO risk-taking incentives in response to risk environments associated with their corporate social responsibility (CSR) standing. We find strong evidence that as a firm's CSR status improves (declines), increasing (decreasing) its risk-taking capacity, the firm responds by adjusting compensation contracts to increase (decrease) CEO risk-taking incentives (Vega). One channel of the adjustment is through stock option grants. Further analyses indicate that the positive CSR-Vega association is stronger in firms with better corporate governance and in industries where riskiness is more important. Our evidence indicates that firms are not passive in response to changes in CSR status and firm risk.

  Link(s) to publication:

  http://dx.doi.org/10.1016/j.jcorpfin.2020.101714

• Boeh, K.; Dunbar, C. G., 2016, "Underwriter deal pipeline and the pricing of IPOs", Journal of Financial Economics, May 120(2): 383 - 399.
  Abstract: This study examines how initial public offering (IPO) pricing is affected by the pipeline of deals in registration, measured at the underwriter level. Examining IPOs from 2002 to 2013 we find evidence that measures of the IPO bookrunner’s pipeline significantly affect pricing decisions. The evidence is mostly consistent with market power and agency theories, which argue that underwriters use a young or growing pipeline to push for higher IPO first day returns.

  Link(s) to publication:

  http://dx.doi.org/10.1016/j.jfineco.2015.08.018

• Boeh, K.; Dunbar, C. G., 2014, "IPO Waves and the Issuance Process", Journal of Corporate Finance, March 25: 455 - 473.
  Abstract: This study examines the impact of institutional features of the IPO market on patterns of IPO activity (waves). Decisions made by firms to enter the market by filing registration documents, adjusting terms while remaining in registration or exiting the market through issuance or withdrawal affect the value in registration of issuers seeking capital. We argue that these past decisions convey private information about issuers' collective view on the state of the IPO market (beyond what is indicated by other macroeconomic and market condition indicators), affecting current activity. In addition to considering the role of past activity on issuance decisions, we introduce additional variables to reflect observable IPO market conditions that affect IPO activity: the standard deviation of IPO initial returns Venture Capital takedown and the average age of IPOs in registration. Our new variables add substantial explanatory value to prior models of IPO activity.

  Link(s) to publication:

  http://dx.doi.org/10.1016/j.jcorpfin.2014.02.001

• Dunbar, C. G.; Foerster, S. R., 2008, "Second Time Lucky? Withdrawn IPOs that Return to the Market", Journal of Financial Economics, March 87(3): 610 - 635.
  Abstract: We investigate issuers withdrawing an IPO (after security regulation filings) that return later for a successful offering. Venture capital backing and reputation of the lead underwriter are key factors in predicting successful return. The possibility of returning has a significant impact on the choice to withdraw and the pricing of offerings that succeed. Our sample of returning IPOs also provides a unique setting to investigate underwriter switching after a withdrawal but before a successful IPO. We find that switching occurs in response to poor bank performance and when switching firms 'graduate' to banks that have high industry market shares.
• Dunbar, C. G.; Clarke, J.; Kahle, K., 2004, "The Long-Run Performance of Secondary Equity Issues: A Direct Test of the Window of Opportunity Hypothesis?", Journal of Business, December 77(3): 575 - 603.
  Abstract: We examine long-run stock and operating performance following secondary equity offerings. For a subsample of secondary issuers in which the seller is an insider, both three- and five-year post-issue abnormal stock returns are significantly negative. The findings are robust to alternative long-run abnormal return measurement methodologies. The abnormal returns are large relative to the initial market reaction (mean and median five-year abnormal returns of -33.33% and -73.80%, respectively). The operating performance of these firms also declines subsequent to the issue. This supports the hypothesis that the negative performance of secondary equity offerings can be attributed to managers exploiting "windows of opportunity" by issuing overvalued shares.
• Clark, J.; Dunbar, C. G.; Kahle, K., 2001, "Long-Run Performance and Insider Trading in Completed vs. Canceled Seasoned Equity Offerings", Journal of Financial and Quantitative Analysis, January 36(4): 415 - 430.
  Abstract: This paper provides evidence on managerial motives for raising equity by examining long-run performance and insider trading around canceled and completed seasoned equity offerings (SEOs). Insider selling increases prior to completed and canceled SEOs, but declines afterward only for canceled offerings. For completed SEOs, pre-filing insider trading is related to long-run performance after completion. For canceled SEOs, pre-filing insider trading is related to stock performance between filing and cancellation. Finally, changes in insider trading around SEO filing affect the probability of cancellation. Overall, the evidence is consistent with insiders exploiting windows of opportunity by attempting to issue overvalued equity and by canceling the issue when the market reaction to the announcement eliminates the overvaluation.
• Dunbar, C. G., 2000, "Factors Affecting Investment Bank Initial Public Offering Market Share", Journal of Financial Economics, January 55: 3 - 41.
  Abstract: This paper examines the effect of several factors on the market share of investment banks that act as book managers in initial public offerings (IPOs) between 1984 and 1995. For established banks, IPO 1st-day returns, 1-year abnormal performance, abnormal compensation, industry specialization, analyst reputation, and association with withdrawn offers have a significant impact on changes in market share. These factors have a more significant effect on market share changes in low-volume IPO markets. These factors have less significant effect on market share, statistically and economically, for less established banks, consistent with the notion that less reputation is placed at risk.
• Dunbar, C. G., 1998, "The Choice Between Firm-Commitment and Best-Efforts Offering Methods in IPOs: The Effect of Unsuccessful Offers", Journal of Financial Intermediation, January 7(1): 60 - 90.
  Abstract: Previous research questions the use of best-efforts offering methods for IPOs since firm-commitment offerings have lower direct issue costs. This paper attempts to explain the choice of best-efforts methods by focusing on an indirect offering cost: the possibility that an offering will be unsuccessful. Determinants of offering success, including offering size, price, underwriter reputation and the clustering of filings, have different impacts on the likelihood of success for these offering methods. Unsuccessful offerings are also found to be costly. Issuers select the offering method that provides the greater ex ante probability of success, all else equal, consistent with cost minimization.
• Dunbar, C. G., 1997, "Overallotment Option Restrictions and Contract Choice in Initial Public Offerings", Journal of Corporate Finance, June 3(3): 251 - 275.
  Abstract: Relaxation of the national association of securities dealers (NASD) limit on overallotment option use in 1983 provides a natural experiment to test the substitutability or complementarity of underwriting contract terms in initial public offerings. For firms that would find the initial limit constraining, use of terms that are substitutes (complements) should decrease (increase) after the limit is raised. The evidence indicates that warrant compensation and overallotment options are substitutes. Underwriter reputation and overallotment options are substitutes if warrants are used as compensation and complements otherwise. The significant change in contract terms after 1983 suggests the initial NASD policy was costly.
• Barclay, M.; Dunbar, C. G., 1996, "Private Information and the Cost of Trading Around Quarterly Earnings Announcements", Financial Analysts Journal, December 52(6): 75 - 84.
  Abstract: No one wants to trade with those who have better information. In markets where traders have asymmetric information, however, both informed and uninformed traders must make strategic trading decisions. Because public announcements can affect the information asymmetry between traders, these strategic decisions are likely to be most important around public announcements. Surprisingly, whether for large-block trades or for the entire order flow, there is no evidence that the uninformed can trade on more favorable terms by varying the timing of their trades in relation to a quarterly earnings announcement.
• Dunbar, C. G., 1995, "The Use of Warrants as Underwriter Compensation in Initial Public Offerings", Journal of Financial Economics, December 38(1): 59 - 78.
  Abstract: Previous research suggests that offering costs are higher when warrants are used to compensate underwriters. This finding potentially arises from a failure to account for self-selection in estimating offering cost relations. Using methods that account for self-selection, I find that underpricing and total offering costs are reduced for firms using warrants as underwriter compensation, consistent with the hypothesis that issuers choose compensation contracts which minimize costs.

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