Why Don't U.S. Issuers Demand European Fees for IPOs?

36 Pages Posted: 24 Dec 2010 Last revised: 7 Mar 2011

See all articles by Mark Abrahamson

Mark Abrahamson

University of Oxford - Said Business School

Tim Jenkinson

University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)

Howard Jones

University of Oxford, Saïd Business School

Date Written: March 4, 2011

Abstract

We compare fees charged by investment banks for conducting IPOs in the U.S. and Europe. In recent years the “7% solution”, as documented by Chen and Ritter (2000), has become even more prevalent in the U.S., and is now the norm for IPOs raising up to $250m. The same banks dominate both markets but European IPO fees are roughly three percentage points lower, are much more variable, and have been falling. We review explanations for the gap in spreads and find the evidence consistent with strategic pricing. U.S. issuers could have saved over $1bn a year by paying European fees.

Keywords: IPOs, Investment Banks, Fees, Underpricing, Bookbuilding

Suggested Citation

Abrahamson, Mark and Jenkinson, Tim and Jones, Howard, Why Don't U.S. Issuers Demand European Fees for IPOs? (March 4, 2011). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1730254

Mark Abrahamson

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Tim Jenkinson (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
United Kingdom
+44 1865 288916 (Phone)
+44 1865 288831 (Fax)

HOME PAGE: http://www.sbs.oxford.edu/timjenkinson

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Howard Jones

University of Oxford, Saïd Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

HOME PAGE: http://www.sbs.ox.ac.uk/research/people/Pages/HowardJones.aspx

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