Bookbuilding and Strategic Allocation

IFA Working Paper No. 286-1999

48 Pages Posted: 15 Apr 1999

See all articles by Francesca Cornelli

Francesca Cornelli

London Business School; Centre for Economic Policy Research (CEPR)

David Goldreich

University of Toronto - Rotman School of Management

Date Written: March 1999


Under the bookbuilding procedure, an investment banker solicits bids for shares from institutional investors prior to pricing the issue. After collecting this demand information, the investment banker prices the issue and allocates shares to the investors. We examine the books from 39 international equity issues. For each issue we consider all institutional bids and the corresponding allocations. We infer some of the criteria the investment banker uses to allocate shares. We find that the investment banker awards more shares to bidders that provide information (such as a limit price in their bids). In addition, regular investors receive more favorable allocations--especially when the issue is heavily oversubscribed. The results support the winner's curse theories and the justifications for the use of bookbuilding.

JEL Classification: G30, G24

Suggested Citation

Cornelli, Francesca and Goldreich, David, Bookbuilding and Strategic Allocation (March 1999). IFA Working Paper No. 286-1999, Available at SSRN: or

Francesca Cornelli (Contact Author)

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
+44 20 7262 5050 x3225 (Phone)
+44 20 7724 3317 (Fax)


Centre for Economic Policy Research (CEPR)

United Kingdom

David Goldreich

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
416-946-0833 (Phone)

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