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Evidence of Information Spillovers in the Production of Investment Banking Services

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  • Benveniste, Lawrence M
  • Ljungqvist, Alexander P
  • Wilhelm Jr, William J
  • Yu, Xiaoyun

Abstract

We present evidence that firms attempting IPOs learn from the experience of their contemporaries. These information spillovers affect revisions in offer terms and the decision whether to carry through with an offering. The evidence also supports the argument that IPOs are implicitly bundled as a means of promoting more equitable sharing of information production costs. One apparent consequence of this behaviour is that while initial returns and IPO volume are positively correlated in the aggregate, the correlation is negative among contemporaneous offerings subject to a common valuation factor. These findings are consistent with the Benveniste, Busaba, and Wilhelm (2001) argument that the dynamics of volume and initial returns in primary equity markets reflect, at least in part, an institutional response to information externalities.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2988.

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Date of creation: Oct 2001
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Handle: RePEc:cpr:ceprdp:2988

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Keywords: going public decision; information externalities; initial public offerings; investment banking;

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  1. Fama, Eugene F. & French, Kenneth R., 1997. "Industry costs of equity," Journal of Financial Economics, Elsevier, vol. 43(2), pages 153-193, February.
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