Evidence Of Information Spillovers In The Production Of Investment Banking Services

43 Pages Posted: 7 Sep 2001  

Lawrence M. Benveniste

University of Minnesota - Twin Cities - Carlson School of Management

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)

Xiaoyun Yu

Indiana University - Kelley School of Business - Department of Finance; China Academy of Financial Research (CAFR)

William J. Wilhelm

University of Virginia - McIntire School of Commerce

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Abstract

We present evidence that firms attempting IPOs learn from the experience of their contemporaries. These information spillovers affect revisions in offer terms and the decision whether to carry through with an offering. The evidence also supports the argument that IPOs are implicitly bundled as a means of promoting more equitable sharing of information production costs. One apparent consequence of this behavior is that while initial returns and IPO volume are positively correlated in the aggregate, the correlation is negative among contemporaneous offerings subject to a common valuation factor. These findings are consistent with the Benveniste, Busaba, and Wilhelm (2001) argument that the dynamics of volume and initial returns in primary equity markets reflect, at least in part, an institutional response to information externalities.

Keywords: Initial Public Offerings, investment banking, information externalities, going public decision

JEL Classification: G32, G24

Suggested Citation

Benveniste, Lawrence M. and Ljungqvist, Alexander and Yu, Xiaoyun and Wilhelm, William J., Evidence Of Information Spillovers In The Production Of Investment Banking Services. Available at SSRN: https://ssrn.com/abstract=282289 or http://dx.doi.org/10.2139/ssrn.282289

Lawrence M. Benveniste

University of Minnesota - Twin Cities - Carlson School of Management ( email )

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Alexander Ljungqvist

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

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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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Xiaoyun Yu (Contact Author)

Indiana University - Kelley School of Business - Department of Finance ( email )

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China Academy of Financial Research (CAFR)

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William J. Wilhelm

University of Virginia - McIntire School of Commerce ( email )

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