Many companies approaching an initial public offering face a familiar concern: whether the underwriters responsible for marketing the deal are fully aligned with the issuer’s interests. IPO underpricing – the tendency for shares to jump in price on the first day of trading – remains one of the most persistent puzzles in financial economics. First-day returns average around 15 percent in many markets, implying that billions of dollars are “left on the table” by issuing firms each year.

In response, a growing number of issuers have begun hiring independent IPO advisers. These firms do not underwrite securities or distribute shares. Instead, they are retained by issuers to help select underwriting banks, coordinate the IPO process, and monitor the conduct of the book-building process. Advisers often participate in key stages of the offering, including bank selection, investor marketing, and pricing discussions.

Despite their increasing prominence, there is little systematic evidence on whether these advisers affect IPO outcomes. In a new working paper, we examine the role of independent advisers, using a new dataset of U.S. and European IPOs between 2010 and 2023. Because adviser mandates are not consistently reported in commercial databases or prospectuses, we assemble the dataset using information obtained directly from advisory firms and supplemented by public disclosures. The resulting dataset provides one of the most comprehensive transaction-level records of adviser participation in IPO markets.

Our analysis shows that adviser involvement is associated with lower first-day returns and smaller offer-price adjustments during book-building. In other words, IPOs with advisers tend to exhibit pricing outcomes that are closer to eventual aftermarket valuations. At the same time, we find no systematic relationship between adviser involvement and underwriting spreads or the probability that an IPO is withdrawn.

One interpretation of these findings is that advisers influence how information is generated and incorporated into IPO prices. Advisers often coordinate investor engagement earlier in the offering process and provide issuers with additional oversight of the order book during marketing. By organizing these information flows, they may help reduce late-stage pricing surprises that lead to large first-day price jumps.

A second interpretation concerns incentives. Advisers frequently play a monitoring role during the IPO process, overseeing the performance of underwriting banks and the allocation of discretionary underwriting fees within the syndicate. By strengthening issuer oversight of book-building, advisers may alter the incentives facing underwriting banks and reduce the scope for strategic underpricing.

These findings highlight an institutional feature of IPO markets that has received little attention in the academic literature: issuer-side governance of the book-building process. Much of the research on IPO pricing focuses on the incentives of underwriters or investors. Our evidence suggests that the governance structures through which issuers oversee the offering process can also shape how information is produced and incorporated into prices.

More broadly, the results point to an emerging role for specialized intermediaries in modern capital markets. Independent IPO advisers appear to function as a form of delegated monitoring within the IPO process, helping issuers navigate complex interactions with underwriting banks and institutional investors. As regulators and policymakers continue to examine the design of IPO markets, understanding these institutional arrangements may prove increasingly important.

Tim Jenkinson and Howard Jones are professors, and Emmanuel Pezier is an associate scholar, at the University of Oxford’s Saïd Business School. This post is based on their new working paper, “Issuer-Side Governance and IPO Price Formation: Evidence from Independent Advisers,” available here.