Analyst Hype in Ipos: Explaining the Popularity of Bookbuilding

Posted: 25 Jun 2008

See all articles by Francois Degeorge

Francois Degeorge

University of Lugano - Faculty of Economics; Swiss Finance Institute; European Corporate Governance Institute (ECGI)

François Derrien

affiliation not provided to SSRN

Kent L. Womack

University of Toronto - Rotman School of Management (Deceased)

Multiple version iconThere are 2 versions of this paper

Date Written: 2007

Abstract

The bookbuilding IPO procedure has captured significant market share from auction alternatives recently, despite the significantly lower costs related to the auction mechanism. In France, where both mechanisms were used in the 1990s, the ostensible advantages of bookbuilding were advertising-related benefits. Book-built issues were more likely to be followed and positively recommended by lead underwriters. Even nonunderwriters' analysts promote book-built issues more in order to curry favor with the IPO underwriter for allocations of future deals. Yet we do not observe valuation or post-IPO return differentials that suggest these types of promotion have any value to the issuing firm.

Keywords: G24, G32

Suggested Citation

Degeorge, Francois and Derrien, François and Womack, Kent L., Analyst Hype in Ipos: Explaining the Popularity of Bookbuilding (2007). The Review of Financial Studies, Vol. 20, Issue 4, pp. 1021-1058, 2007. Available at SSRN: https://ssrn.com/abstract=1151160 or http://dx.doi.org/10.1093/rfs/hhm010

Francois Degeorge (Contact Author)

University of Lugano - Faculty of Economics ( email )

via Giuseppe Buffi 13
CH-6904 Lugano
Switzerland
41 58 666 4634 (Phone)
41 58 666 4647 (Fax)

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

François Derrien

affiliation not provided to SSRN

No Address Available

Kent L. Womack

University of Toronto - Rotman School of Management (Deceased)

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