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Evidence of Information Spillovers in the Production of Investment Banking Services

Author

Listed:
  • Lawrence M. Benveniste

    (University of Minnesota Carlson School of Management)

  • Alexander Ljungqvist

    (New York University Stern School of Business and the Centre for Economic Policy Research, London)

  • William J. Wilhelm

    (Oxford University Saïd Business School and the University of Virginia McIntire School of Commerce)

  • Xiaoyun Yu

    (Indiana University Kelly School of Business)

Abstract

We provide evidence that firms attempting IPOs condition offer terms and the decision whether to carry through with an offering on the experience of their primary market contemporaries. Moreover, 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. Our findings are consistent with investment banks implicitly bundling offerings subject to a common valuation factor to achieve more equitable internalization of information production costs and thereby preventing coordination failures in primary equity markets. Copyright (c) 2003 by the American Finance Association.

Suggested Citation

  • Lawrence M. Benveniste & Alexander Ljungqvist & William J. Wilhelm & Xiaoyun Yu, 2003. "Evidence of Information Spillovers in the Production of Investment Banking Services," Journal of Finance, American Finance Association, vol. 58(2), pages 577-608, April.
  • Handle: RePEc:bla:jfinan:v:58:y:2003:i:2:p:577-608
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • 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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