Jenkinson, Tim, Morrison, Alan and Wilhelm, William (2006) Why are European IPOs so rarely priced outside the indicative price range? Journal of Financial Economics, 80 (1). pp. 185-209.
Unlike in the U.S., the initial price range for European IPOs is seldom revised, although issues are often priced at the upper bound. We develop a model that explains this seemingly inefficient pricing behavior. As in Europe, but not in the U.S., underwriters in the model obtain information from investors before establishing the indicative price range. A commitment to stay within the range is necessary to extract private information from investors. Ours is therefore the first treatment in which the bookbuilding range has a clear economic role. The model has important implications for empirical research based on European primary market data.
|Keywords:||IPO underpricing, Bookbuilding, Information acquisition, finance|
|Centre:||Oxford Private Equity Institute|
|Date Deposited:||21 Dec 2011 15:55|
|Last Modified:||27 Feb 2017 13:57|
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