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Gentlemanly Capitalism Revisited: A Case Study of the Underpricing of Initial Public Offerings on the London Stock Exchange 1946-86

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  • David Chambers

Abstract

Allegations 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.

Suggested Citation

  • David Chambers, 2007. "Gentlemanly Capitalism Revisited: A Case Study of the Underpricing of Initial Public Offerings on the London Stock Exchange 1946-86," Economics Series Working Papers 253, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:253
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    File URL: http://www.economics.ox.ac.uk/materials/working_papers/paper253.pdf
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    Cited by:

    1. 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.
    2. 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.
    3. 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, February.

    More about this item

    Keywords

    IPO; British capital market failure; Tender offer;

    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

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