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Regulating IPOs: Evidence from Going Public in London and Berlin, 1900-1913

49 Pages Posted: 12 Jul 2011 Last revised: 16 Mar 2012

Carsten Burhop

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods

David Chambers

University of Cambridge - Judge Business School, Department of Finance & Accounting

Brian R. Cheffins

University of Cambridge - Faculty of Law; European Corporate Governance Institute (ECGI)

Date Written: January 1, 2012

Abstract

We revisit debates on the regulation of IPOs by analyzing failure rates of IPOs carried out between 1900 and 1913 on the London and Berlin stock exchanges, two of the leading financial markets during the early 20th century. IPOs were regulated more heavily in Germany than in Britain and, as might be expected, the failure rate of IPOs on the Berlin Stock Exchange was lower than it was on the London Stock Exchange. On the other hand, the failure rate of IPOs obtaining an “Official Quotation” on the London Stock Exchange was almost as low as Berlin’s. Moreover, while tough regulation of IPOs can result in a counterproductive restriction of investment choice, in the case of a London Stock Exchange junior market known as the Special Settlement sector post-IPO performance was sufficiently poor to suggest that tighter regulation would have been beneficial to the average investor.

Keywords: law and finance, initial public offering, regulation, investor protection, financial history

JEL Classification: G14, G18, G24, G32, G38, K22, N23

Suggested Citation

Burhop, Carsten and Chambers, David and Cheffins, Brian R., Regulating IPOs: Evidence from Going Public in London and Berlin, 1900-1913 (January 1, 2012). ECGI - Law Working Paper No. 180/2011; University of Cambridge Faculty of Law Research Paper No. 2/2012. Available at SSRN: https://ssrn.com/abstract=1884190 or http://dx.doi.org/10.2139/ssrn.1884190

Carsten Burhop

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

David Chambers (Contact Author)

University of Cambridge - Judge Business School, Department of Finance & Accounting ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
44 (0)1223 339700 (Phone)

Brian R. Cheffins

University of Cambridge - Faculty of Law ( email )

10 West Road
Cambridge, CB3 9DZ
United Kingdom
+44 1223 330084 (Phone)
+44 1223 330055 (Fax)

European Corporate Governance Institute (ECGI)

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

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