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IPO procedures in Europe : the development of practices and perspectives

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  • Emmanuel Boutron
  • Jean-François Gajewski
  • Carole Gresse
  • Florence Labégorre

Abstract

[eng] Because IPO mechanisms determine the initial trading price and the allocation of newly listed firms’ shares, they have financial and strategic consequences for shareholders. For that reason, it is of interest to analyse the relative advantages and disadvantages of the different procedures made available to candidate firms. A survey of listing practices in fifteen European countries shows the increasing prominence of book-building. Although this IPO mechanism is probably the only way to go public for young and risky firms that could not list otherwise, auctions run by exchanges may enhance the competitiveness and efficiency of the primary markets for issuers and investors. Further, in the prospect of integrated European stock markets, it appears necessary to pursue the harmonisation of IPO procedures and listing requirements that has started with the enforcement of the Prospectus Directive. . JEL classification : G14, G15, G24, G32

Suggested Citation

  • Emmanuel Boutron & Jean-François Gajewski & Carole Gresse & Florence Labégorre, 2006. "IPO procedures in Europe : the development of practices and perspectives," Revue d'Économie Financière, Programme National Persée, vol. 82(1), pages 89-105.
    • Handle: RePEc:prs:recofi:ecofi_1767-4603_2006_num_82_1_4439
    DOI: 10.3406/ecofi.2006.4439
    Note: DOI:10.3406/ecofi.2006.4439
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    References listed on IDEAS

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    1. Benveniste, Lawrence M. & Busaba, Walid Y., 1997. "Bookbuilding vs. Fixed Price: An Analysis of Competing Strategies for Marketing IPOs," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 32(4), pages 383-403, December.
    2. Franҫois Derrien, 2005. "IPO Pricing in “Hot” Market Conditions: Who Leaves Money on the Table?," Journal of Finance, American Finance Association, vol. 60(1), pages 487-521, February.
    3. Jenkinson, Tim & Jones, Howard, 2002. "Bids and Allocations in European IPO Bookbuilding," CEPR Discussion Papers 3644, C.E.P.R. Discussion Papers.
    4. François Degeorge & François Derrien & Kent L. Womack, 2004. "Quid Pro Quo in IPOs: Why Book-building is Dominating Auctions," Working Papers 2004.150, Fondazione Eni Enrico Mattei.
    5. Torstila, Sami, 2003. "The Clustering of IPO Gross Spreads: International Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(3), pages 673-694, September.
    6. Sherman, Ann E. & Titman, Sheridan, 2002. "Building the IPO order book: underpricing and participation limits with costly information," Journal of Financial Economics, Elsevier, vol. 65(1), pages 3-29, July.
    7. Bruno Biais & Peter Bossaerts & Jean-Charles Rochet, 2002. "An Optimal IPO Mechanism," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(1), pages 117-146.
    8. François Derrien, 2005. "IPO Pricing in 'Hot' Market Conditions: Who Leaves Money on the Table?," Post-Print hal-00480827, HAL.
    9. Rock, Kevin, 1986. "Why new issues are underpriced," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 187-212.
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    Cited by:

    1. Lehmann, Timo & Weber, Matthias, 2021. "IPO Underpricing and Aftermarket Price Accuracy: Auctions vs. Bookbuilding in Japan," SocArXiv sa385, Center for Open Science.
    2. Timo Lehmann & Matthias Weber, 2023. "Auctions versus bookbuilding: The effects of IPO regulation in Japan," The Financial Review, Eastern Finance Association, vol. 58(1), pages 117-141, February.

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    More about this item

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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