Has the Introduction of Bookbuilding Increased the Efficiency of International IPOs?
AbstractBy 1999, close to 80% of non-US IPOs were marketed using bookbuilding methods. We study whether the recent introduction of this technology by US banks and their inclusion in non-US IPO syndicates has promoted efficiency in primary equity markets. We analyse both direct and indirect costs (associated with underpricing) using a unique dataset containing information on 2,051 initial public offerings in 61 non-US markets during the period 1992-1999. The direct costs of bookbuilding are typically twice as large as direct costs for fixed-price offers. However, bookbuilding leads to substantially less underpricing. This benefit is more pronounced when the target market includes US investors, when Us listing is sought and when US banks are part of the syndicate.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2484.
Date of creation: Jun 2000
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Other versions of this item:
- Tim Jenkinson & William Wilhelm & Alexander Ljungqvist, 2000. "Has the introduction of bookbuilding increased the efficiency of international IPOs?," OFRC Working Papers Series 2000fe04, Oxford Financial Research Centre.
- Tim Jenkinson & William Wilhelm, 2000. "Has the introduction of bookbuilding increased the efficiency of international IPOs?," Economics Series Working Papers 2000-FE-04, University of Oxford, Department of Economics.
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Hsuan-Chi Chen & Jay R. Ritter, 2000. "The Seven Percent Solution," Journal of Finance, American Finance Association, vol. 55(3), pages 1105-1131, 06.
- Lee, Lung-Fei, 1978. "Unionism and Wage Rates: A Simultaneous Equations Model with Qualitative and Limited Dependent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(2), pages 415-33, June.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
- Alexander P. Ljungqvist & William J. Wilhelm, 1999.
"The Seven Percent Solution? An International Perspective on Underwriting Spreads,"
OFRC Working Papers Series
1999fe11, Oxford Financial Research Centre.
- William Wilhelm & Alexander Ljungqvist, 1999. "The Seven Percent Solution? An International Perspective on Underwriting Spreads," Economics Series Working Papers 1999-FE-11, University of Oxford, Department of Economics.
- Ljungqvist, Alexander P & Wilhelm Jr, William J, 2001. "The Seven Percent Solution? An International Perspective On Underwriting Spreads," CEPR Discussion Papers 2736, C.E.P.R. Discussion Papers.
- Smith, Richard L, 1987. " The Choice of Issuance Procedure and the Cost of Competitive and Negotiated Underwriting: An Examination of the Impact of Rule 50," Journal of Finance, American Finance Association, vol. 42(3), pages 703-20, July.
- Dunbar, Craig G., 2000. "Factors affecting investment bank initial public offering market share," Journal of Financial Economics, Elsevier, vol. 55(1), pages 3-41, January.
- Heckman, James, 2013.
"Sample selection bias as a specification error,"
Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
- 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.
- Hanley, Kathleen Weiss, 1993. "The underpricing of initial public offerings and the partial adjustment phenomenon," Journal of Financial Economics, Elsevier, vol. 34(2), pages 231-250, October.
- Jones, Steven L. & Megginson, William L. & Nash, Robert C. & Netter, Jeffry M., 1999. "Share issue privatizations as financial means to political and economic ends," Journal of Financial Economics, Elsevier, vol. 53(2), pages 217-253, August.
- Cornelli, Francesca & Goldreich, David, 1999. "Bookbuilding and Strategic Allocation," CEPR Discussion Papers 2160, C.E.P.R. Discussion Papers.
- Koh, Francis & Walter, Terry, 1989. "A direct test of Rock's model of the pricing of unseasoned issues," Journal of Financial Economics, Elsevier, vol. 23(2), pages 251-272, August.
- Ljungqvist, Alexander P., 1997. "Pricing initial public offerings: Further evidence from Germany," European Economic Review, Elsevier, vol. 41(7), pages 1309-1320, July.
- Madhavan, Ananth & Cheng, Minder, 1997. "In Search of Liquidity: Block Trades in the Upstairs and Downstairs Markets," Review of Financial Studies, Society for Financial Studies, vol. 10(1), pages 175-203.
- 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.
- Ann E. Sherman & Sheridan Titman, 2000. "Building the IPO Order Book: Underpricing and Participation Limits With Costly Information," NBER Working Papers 7786, National Bureau of Economic Research, Inc.
- Farinos, Jose E. & Garcia, C. Jose & Ibanez, Ana Ma, 2007. "Operating and stock market performance of state-owned enterprise privatizations: The Spanish experience," International Review of Financial Analysis, Elsevier, vol. 16(4), pages 367-389.
- 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.
- L. Cassia & G. Giudici & S. Paleari & R. Redondi, 2004. "IPO underpricing in Italy," Applied Financial Economics, Taylor and Francis Journals, vol. 14(3), pages 179-194.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.