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Has the introduction of bookbuilding increased the efficiency of international IPOs?

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  • Tim Jenkinson

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  • William Wilhelm

    ()

  • Alexander Ljungqvist

Abstract

By 1999, close to 80% of non-U.S. IPOs were marketed using bookbuilding methods. We study whether the recent introduction of this technology by U.S. banks and their inclusion in non-U.S. IPO syndicates has promoted efficiency in primary equity markets. We analyze both direct and indirect costs (associated with underpricing) using a unique dataset containing information on 2,051 initial public offerings in 61 non-U.S. 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 U.S. investors, when U.S. listing is sought and when U.S. banks are part of the syndicate.

Suggested Citation

  • 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.
  • Handle: RePEc:sbs:wpsefe:2000fe04
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    File URL: http://www.finance.ox.ac.uk/file_links/finecon_papers/2000fe04.pdf
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. L. Cassia & G. Giudici & S. Paleari & R. Redondi, 2004. "IPO underpricing in Italy," Applied Financial Economics, Taylor & Francis Journals, vol. 14(3), pages 179-194.
    3. 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.
    4. 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.
    5. Josef Schuster, 2003. "The Cross-Section of European IPO Returns," FMG Discussion Papers dp460, Financial Markets Group.

    More about this item

    JEL classification:

    • 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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