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Bookbuilding and Strategic Allocation

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Author Info
Francesca Cornelli
Abstract

In the bookbuilding procedure, an investment banker solicits bids for shares from institutional investors prior to pricing an equity issue. The banker then prices the issue and allocates shares at his discretion to the investors. We examine the books for 39 international equity issues. We find that the investment banker awards more shares to bidders who provide information in their bids. Regular investors receive favorable allocations, especially when the issue is heavily oversubscribed. The investment banker also favors revised bids and domestic investors. Copyright The American Finance Association 2001.

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Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 56 (2001)
Issue (Month): 6 (December)
Pages: 2337-2369
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Handle: RePEc:bla:jfinan:v:56:y:2001:i:6:p:2337-2369

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  1. Cornelli, Francesca & Goldreich, David, 2001. "Bookbuilding: How Informative is the Order Book?," CEPR Discussion Papers 2863, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Angenendt, P-P & Goergen, M. & Renneboog,, 2005. "Shareholder lock-in contracts : share price and trading volume effects at the lock-in expiry," Discussion Paper 30, Tilburg University, Tilburg Law and Economic Center. [Downloadable!]
    Other versions:
  3. Axelson, Ulf, 2005. "Security Design with Investor Private Information," SIFR Research Report Series 37, Institute for Financial Research. [Downloadable!]
  4. Jenkinson, Tim & Jones, Howard, 2002. "Bids and Allocations in European IPO Bookbuilding," CEPR Discussion Papers 3644, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Ravi Jagannathan & Ann E. Sherman, 2006. "Why Do IPO Auctions Fail?," NBER Working Papers 12151, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Guray Kucukkocaoglu, 2007. "Underpricing in Turkey: Comparison of the IPO Methods," Money Macro and Finance (MMF) Research Group Conference 2006 8, Money Macro and Finance Research Group. [Downloadable!]
  7. Qi Quan & Nancy Huyghebaert, 2005. "Share Issuing Privatizations in China: Determinants of Public Share Allocation and Underpricing," LICOS Discussion Papers 16205, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
  8. Benveniste, Lawrence M & Ljungqvist, Alexander P & Wilhelm Jr, William J & Yu, Xiaoyun, 2001. "Evidence of Information Spillovers in the Production of Investment Banking Services," CEPR Discussion Papers 2988, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Alex Stomper & Wolfgang Aussenegg & Pegaret Pichler, 2004. "IPO Pricing with Bookbuilding and a When-Issued Market," Working Papers 2004.8, Fondazione Eni Enrico Mattei. [Downloadable!]
  10. William J. Wilhelm & Alan Morrison & Tim Jenkinson, 2003. "Why are European IPOs so rarely priced outside the indicative price range?," OFRC Working Papers Series 2003fe05, Oxford Financial Research Centre. [Downloadable!]
    Other versions:
  11. Tim Jenkinson & Howard Jones, 2006. "IPO pricing and allocation: a survey of the views of institutional investors," OFRC Working Papers Series 2006fe13, Oxford Financial Research Centre. [Downloadable!]
    Other versions:
  12. Vicente Pons-Sanz, 2005. "Who benefits from IPO underpricing? Evidence form hybrid bookbuilding offerings," Working Paper Series 428, European Central Bank. [Downloadable!]
  13. Naoki KOJIMA, 2004. "The IPO Spread and Conflicts of Interests," Economics and Finance Discussion Papers 04-06, Economics and Finance Section, School of Social Sciences, Brunel University. [Downloadable!]
  14. Naoki KOJIMA, 2004. "The IPO Spread and Conflicts of Interests," Public Policy Discussion Papers 04-06, Economics and Finance Section, School of Social Sciences, Brunel University. [Downloadable!]
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