Global Integration in Primary Equity Markets: The Role of U.S. Banks and U.S. Investors

46 Pages Posted: 16 Oct 2000

See all articles by Alexander Ljungqvist

Alexander Ljungqvist

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Research Institute of Industrial Economics (IFN)

Tim Jenkinson

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

William J. Wilhelm

University of Virginia - McIntire School of Commerce

Multiple version iconThere are 4 versions of this paper

Date Written: September 3, 2001

Abstract

We examine the costs and benefits of the global integration of IPO markets associated with the diffusion of U.S. underwriting methods in the 1990s. Bookbuilding is becoming increasingly popular outside the U.S. and typically costs twice as much as a fixed-price offer. However, on its own bookbuilding only leads to lower underpricing when conducted by U.S. banks and/or targeted at U.S. investors. For most issuers, the gains associated with lower underpricing outweighed the additional costs associated with hiring U.S. banks or marketing in the U.S. This suggests a quality/price trade-off contrasting with the findings of Chen and Ritter [Journal of Finance], particularly since non-U.S. issuers raising USS20m-80m also typically pay a 7% spread when U.S. banks and investors are involved.

Keywords: Initial public offerings, bookbuilding, underwriting spreads, international finance, market integration

JEL Classification: G32

Suggested Citation

Ljungqvist, Alexander and Jenkinson, Tim and Wilhelm, William J., Global Integration in Primary Equity Markets: The Role of U.S. Banks and U.S. Investors (September 3, 2001). Available at SSRN: https://ssrn.com/abstract=244088 or http://dx.doi.org/10.2139/ssrn.244088

Alexander Ljungqvist (Contact Author)

New York University (NYU) - Department of Finance ( email )

Stern School of Business
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National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR)

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European Corporate Governance Institute (ECGI)

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Research Institute of Industrial Economics (IFN) ( email )

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Tim Jenkinson

University of Oxford - Said Business School ( email )

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

European Corporate Governance Institute (ECGI)

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

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

William J. Wilhelm

University of Virginia - McIntire School of Commerce ( email )

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Charlottesville, VA 22904-4173
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HOME PAGE: http://gates.comm.virginia.edu/wjw9a/

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