Market expectations and the impact of credit rating on the IPOs of U.S. banks

This study examines the impact of credit ratings on Initial Public Offerings (IPOs) for a sample of 336 U.S. banks. We report novel evidence in relation to the framework of An and Chan (2008) and Goergen et al. (2021). First, our empirical findings document that top management's decision of U.S. banks through to seek CRA evaluations turns out to be visible to potential IPO investors and contributes to a successful first trading day. Second, we confirm the relation between the existence of any credit rating (acquired from the three major U.S. agencies) and underpricing. Third, multiple credit ratings lead to lower underpricing than in the case of a single rating. Multiple credit ratings also contribute to reducing the filing price revisions. Finally, we report that in all cases, the credit rating that a rated U.S. bank IPO received after the completion of the public offering was higher than the last one received before the IPO.