Global Integration in Primary Equity Markets: The Role of U.S. Banks and U.S. Investors
AbstractWe examine the costs and benefits of the global integration of initial public offering (IPO) markets associated with the diffusion of U.S. underwriting methods in the 1990s. Bookbuilding is becoming increasingly popular outside the United States and typically costs twice as much as a fixed-price offer. However, on its own, bookbuilding only leads to lower underpricing when conducted by U.S. banks and-or targeted at U.S. investors. For most issuers, the gains associated with lower underpricing outweighed the additional costs associated with hiring U.S. banks or marketing in the United States. This suggests a quality-price trade-off contrasting with the findings of Chen and Ritter, particularly since non-U.S. issuers raising US$20 million--US$80 million also typically pay a 7% spread when U.S. banks and investors are involved. Copyright 2003, Oxford University Press.
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Bibliographic InfoArticle provided by Society for Financial Studies in its journal The Review of Financial Studies.
Volume (Year): 16 (2003)
Issue (Month): 1 ()
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Postal: Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.
Web page: http://www.rfs.oupjournals.org/
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Other versions of this item:
- 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.
- Alexander Ljungqvist & Tim Jenkinson & William Wilhelm, 2001. "Global Integration in Primary Equity Markets: The Role of U.S. Banks and U.S. Investors," OFRC Working Papers Series 2001fe06, Oxford Financial Research Centre.
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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