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|Title: ||IPO Allocations: Discriminatory or Discretionary?|
|Authors: ||Ljungqvist, Alexander|
Wilhelm, William J. Jr.
|Keywords: ||Initial public offerings|
|Issue Date: ||29-Aug-2001 |
|Series/Report no.: ||S-FI-01-02|
|Abstract: ||We estimate the structural links between IPO allocations, pre-market
information production, and initial underpricing returns, within the
context of theories of book building. Using a sample of both U.S. and
international IPOs we find evidence of the following: · IPO
allocation policies favor institutional investors, both in the U.S. and
worldwide. ·Constraints on the discretion bankers exercise in the
allocation of IPO shares reduce institutional allocations.
·Constraints on allocation discretion result in offer prices that
deviate less from the indicative price range established prior to
bankers’ efforts to gauge demand among institutional investors. We
interpret this as indicative of diminished information production.
· Initial returns, which reflect a significant indirect cost of
going public, are directly related to this measure of information
production and inversely related to the fraction of shares allocated to
|Appears in Collections:||Financial Institutions|
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