Evidence Of Information Spillovers In The Production Of Investment Banking Services
Lawrence M. Benveniste
University of Minnesota - Twin Cities - Carlson School of Management
New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Research Institute of Industrial Economics (IFN)
Indiana University - Kelley School of Business - Department of Finance; China Academy of Financial Research (CAFR)
William J. Wilhelm
University of Virginia - McIntire School of Commerce
We present evidence that firms attempting IPOs learn from the experience of their contemporaries. These information spillovers affect revisions in offer terms and the decision whether to carry through with an offering. The evidence also supports the argument that IPOs are implicitly bundled as a means of promoting more equitable sharing of information production costs. One apparent consequence of this behavior is that while initial returns and IPO volume are positively correlated in the aggregate, the correlation is negative among contemporaneous offerings subject to a common valuation factor. These findings are consistent with the Benveniste, Busaba, and Wilhelm (2001) argument that the dynamics of volume and initial returns in primary equity markets reflect, at least in part, an institutional response to information externalities.
Number of Pages in PDF File: 43
Keywords: Initial Public Offerings, investment banking, information externalities, going public decision
JEL Classification: G32, G24
Date posted: September 7, 2001
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