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Bids and Allocations in European IPO Bookbuilding

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  • TIM JENKINSON
  • HOWARD JONES

Abstract

This paper uses evidence from a data set of 27 European IPOs to analyze how investors bid and the factors that influence their allocations. We also make use of a unique ranking of investor quality, associated with the likelihood of flipping the IPO. We find that investors perceived to be long-term holders of the stock are consistently favored in allocation and in out-turn profits. In contrast to Cornelli and Goldreich (2001) , we find little evidence that more informative bids receive larger allocations or higher profits. Our results cast doubt upon the extent of information production during the bookbuilding period. Copyright 2004 by The American Finance Association.

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Bibliographic Info

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

Volume (Year): 59 (2004)
Issue (Month): 5 (October)
Pages: 2309-2338

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Handle: RePEc:bla:jfinan:v:59:y:2004:i:5:p:2309-2338

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  1. Ljungqvist, Alexander P. & Wilhelm, William Jr., 2002. "IPO allocations: discriminatory or discretionary?," Journal of Financial Economics, Elsevier, vol. 65(2), pages 167-201, August.
  2. Benveniste, Lawrence M. & Spindt, Paul A., 1989. "How investment bankers determine the offer price and allocation of new issues," Journal of Financial Economics, Elsevier, vol. 24(2), pages 343-361.
  3. Jay Ritter & Ivo Welch, 2002. "A Review of IPO Activity, Pricing and Allocations," Yale School of Management Working Papers ysm258, Yale School of Management, revised 01 Apr 2002.
  4. Tim Jenkinson & William Wilhelm, 2001. "Global Integration in Primary Equity Markets: The Role of U.S. Banks and U.S. Investors," Economics Series Working Papers 2001-FE-06, University of Oxford, Department of Economics.
  5. Rock, Kevin, 1986. "Why new issues are underpriced," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 187-212.
  6. Benveniste, Lawrence M. & Wilhelm, William J., 1990. "A comparative analysis of IPO proceeds under alternative regulatory environments," Journal of Financial Economics, Elsevier, vol. 28(1-2), pages 173-207.
  7. Francesca Cornelli, 2001. "Bookbuilding and Strategic Allocation," Journal of Finance, American Finance Association, vol. 56(6), pages 2337-2369, December.
  8. Daniel J. Bradley & Bradford D. Jordan & Jay R. Ritter, 2003. "The Quiet Period Goes out with a Bang," Journal of Finance, American Finance Association, vol. 58(1), pages 1-36, 02.
  9. Reena Aggarwal, 2000. "Stabilization Activities by Underwriters after Initial Public Offerings," Journal of Finance, American Finance Association, vol. 55(3), pages 1075-1103, 06.
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