Evidence of Information Spillovers in the Production of Investment Banking Services

Posted: 7 Jun 2002

See all articles by Lawrence M. Benveniste

Lawrence M. Benveniste

University of Minnesota - Twin Cities - Carlson School of Management

Alexander Ljungqvist

Centre for Economic Policy Research (CEPR); Swedish House of Finance; European Corporate Governance Institute (ECGI); Research Institute of Industrial Economics (IFN)

Xiaoyun Yu

Indiana University Kelley School of Business; European Corporate Governance Institute (ECGI); China Academy of Financial Research (CAFR)

William J. Wilhelm

University of Virginia - McIntire School of Commerce

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Abstract

We provide evidence that firms attempting IPOs condition offer terms and the decision whether to carry through with an offering on the experience of their primary market contemporaries. Moreover, 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. Our findings are consistent with investment banks implicitly bundling offerings subject to a common valuation factor to achieve more equitable internalization of information production costs and thereby preventing coordination failures in primary equity markets.

Keywords: spiders, index funds, mutual funds, performance

JEL Classification: G32, G24

Suggested Citation

Benveniste, Lawrence M. and Ljungqvist, Alexander and Ljungqvist, Alexander and Yu, Xiaoyun and Wilhelm, William J., Evidence of Information Spillovers in the Production of Investment Banking Services. Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=307146

Lawrence M. Benveniste

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

321 19th Avenue South
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Alexander Ljungqvist (Contact Author)

Centre for Economic Policy Research (CEPR)

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United Kingdom

Swedish House of Finance ( email )

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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

Indiana University Kelley School of Business ( email )

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European Corporate Governance Institute (ECGI) ( email )

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Belgium

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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