Gentlemanly Capitalism Revisited: A Case Study of the Underpricing of Initial Public Offerings on the London Stock Exchange 1946-86
AbstractAllegations of British capital market failure are numerous, range from claims of domestic investor bias before 1914 to charges of short-termism against institutional investors towards the end of the last century, and are frequently contentious. This paper revisits this literature by pointing up the post-1945 IPO market as a clear example of capital market failure. Despite the tender offer method delivering 10% lower underpricing than the dominant IPO method, it was adopted by fewer than 1 in 10 firms going public. This missed opportunity cost issuing firms �1.4 billion in money left on the table between 1960 and 1986 at 2004 prices and can be attributed to a lack of competition among issuing houses and brokers pre-Big Bang.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 253.
Date of creation: 01 Dec 2007
Date of revision:
IPO; British capital market failure; Tender offer;
Find related papers by JEL classification:
- N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-03-18 (All new papers)
- NEP-FIN-2006-03-18 (Finance)
- NEP-FMK-2006-03-18 (Financial Markets)
- NEP-HIS-2006-03-18 (Business, Economic & Financial History)
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- Carsten Burhop & Thorsten Luebbers, 2011. "The design of licensing contracts: Chemicals, Pharmaceuticals, and Electrical Engineering in Imperial Germany," Cologne Economic History papers 11, University of Cologne, Department of Economic and Business History, revised Jun 2011.
- Carsten Burhop & David Chambers & Brian Cheffins, 2011. "Is Regulation Essential to Stock Market Development? Going Public in London and Berlin, 1900-1913," Cologne Economic History papers 10, University of Cologne, Department of Economic and Business History, revised Mar 2011.
- Carsten Burhop, 2011. "The Underpricing of Initial Public Offerings at the Berlin Stock Exchange, 1870–96," German Economic Review, Verein für Socialpolitik, vol. 12(1), pages 11-32, 02.
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