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On the Uniformity of Investment Banking Spreads: The Seven Percent Solution is Not Unique

Alexander W. Butler
Rice University - Jesse H. Jones Graduate School of Management

Pinghsun Huang
National Cheng Kung University

June 12, 2002

Abstract:
We investigate investment bank gross spreads for Hong Kong IPOs during 1991-2000 and find pronounced clustering - nearly 94 percent have spreads of exactly 2.5 percent. This clustering is invariant to issue size and decreases through time. We find that SEO spreads cluster as well - at 2.0 percent and at 2.5 percent. We document institutional features that contribute to the low level of spreads, and provide preliminary evidence that the recent arrival of the book-building process for Hong Kong IPOs has increased the level and decreased the clustering of IPO gross spreads.

Keywords: Initial public offerings, seasoned equity offerings, gross spreads, Hong Kong

JEL Classifications: G24, L10

Working Paper Series

Date posted: July 26, 2002 ; Last revised: September 13, 2002

Suggested Citation

Huang, Pinghsun and Butler, Alexander W., On the Uniformity of Investment Banking Spreads: The Seven Percent Solution is Not Unique (June 12, 2002). Available at SSRN: http://ssrn.com/abstract=318480 or doi:10.2139/ssrn.318480

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Contact Information

Pinghsun Huang (Contact Author) National Cheng Kung University ( email ) 1 Ta-Hsueh Road Tainan 701 Taiwan +886 6 275 7575 ext 53441 (Phone) +886 6 274 4104 (Fax)
Alexander W. Butler Rice University - Jesse H. Jones Graduate School of Management ( email ) MS 531 Houston, TX 77005 United States 713-348-6341 (Phone) HOME PAGE: http://www.owlnet.rice.edu/~awbutler/