Global integration in primary equity markets: the role of U.S. banks and U.S. investors

Ljungqvist, Alexander P., Jenkinson, Tim and Wilhelm, William (2003) Global integration in primary equity markets: the role of U.S. banks and U.S. investors. The Review of Financial Studies, 16 (1). pp. 63-99.

Abstract

We examine the costs and benefits of the global integration of initial public offering (IPO) markets associated with the diffusion of U.S. underwriting methods in the 1990s. Bookbuilding is becoming increasingly popular outside the United States and typically costs twice as much as a fixed‐price offer. However, on its own, bookbuilding only leads to lower underpricing when conducted by U.S. banks and/or targeted at U.S. investors. For most issuers, the gains associated with lower underpricing outweighed the additional costs associated with hiring U.S. banks or marketing in the United States. This suggests a quality/price trade‐off contrasting with the findings of Chen and Ritter, particularly since non‐U.S. issuers raising US$20 million–US$80 million also typically pay a 7% spread when U.S. banks and investors are involved.

Item Type: Article
Keywords: banking; securities; bookbuilding; finance
Subject(s): Finance
Private equity
Centre: Oxford Private Equity Institute
Date Deposited: 21 Dec 2011 15:02
Last Modified: 27 Feb 2017 14:18
Funders: N/A
URI: http://eureka.sbs.ox.ac.uk/id/eprint/1373

Actions (login required)

Edit View Edit View