Abstract

http://ssrn.com/abstract=2138372
 
 

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Prevention is Better than Cure: The Role of IPO Syndicates in Precluding Information Acquisition


Yoram Barzel


University of Washington

Michel A. Habib


University of Zurich; Swiss Finance Institute

D. Bruce Johnsen


George Mason University - School of Law; PERC - Property and Environment Research Center

November 1, 2006

Journal of Business, Vol. 79, No. 6, 2006

Abstract:     
We treat information acquisition by potential investors in initial public offerings as endogenous. With endogenous information, the critical question is why underwriters would allow investors to spend resources acquiring superior information intended solely to effect a wealth transfer. We show that an investment banking syndicate is an institutional arrangement designed to avoid such a transfer. By inviting rival banks to share in the offering, a managing underwriter ensures they have a strong incentive to remain ignorant. We characterize the resulting outcome as one of symmetric ignorance. The desire to maintain symmetric ignorance is consistent with the observed passivity of nonmanaging syndicate participants.

Accepted Paper Series


Not Available For Download

Date posted: August 29, 2012  

Suggested Citation

Barzel, Yoram and Habib, Michel A. and Johnsen, D. Bruce, Prevention is Better than Cure: The Role of IPO Syndicates in Precluding Information Acquisition (November 1, 2006). Journal of Business, Vol. 79, No. 6, 2006. Available at SSRN: http://ssrn.com/abstract=2138372

Contact Information

Yoram Barzel
University of Washington ( email )
Box 353330
Seattle, WA 98195-3330
United States
206-543-2510 (Phone)
206-685-7477 (Fax)
Michel A. Habib (Contact Author)
University of Zurich ( email )
Plattenstrasse 14
Zurich, 8032
Switzerland
41-44-634-2507 (Phone)
41-44-634-4903 (Fax)
HOME PAGE: http://www.isb.uzh.ch/institut/profs/mhabib.htm
Swiss Finance Institute ( email )
c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland

D. Bruce Johnsen
George Mason University - School of Law ( email )
3301 Fairfax Drive
Arlington, VA 22201
United States
703-993-8066 (Phone)
703-993-8088 (Fax)
PERC - Property and Environment Research Center
2048 Analysis Drive
Suite A
Bozeman, MT 59718
United States

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