On the Uniformity of Investment Banking Spreads: The Seven Percent Solution is Not Unique

15 Pages Posted: 26 Jul 2002

See all articles by Pinghsun Huang

Pinghsun Huang

National Cheng Kung University

Alexander W. Butler

Rice University - Jesse H. Jones Graduate School of Business

Date Written: June 12, 2002

Abstract

We investigate investment bank gross spreads for Hong Kong IPOs during 1991-2000 and find pronounced clustering - nearly 94 percent have spreads of exactly 2.5 percent. This clustering is invariant to issue size and decreases through time. We find that SEO spreads cluster as well - at 2.0 percent and at 2.5 percent. We document institutional features that contribute to the low level of spreads, and provide preliminary evidence that the recent arrival of the book-building process for Hong Kong IPOs has increased the level and decreased the clustering of IPO gross spreads.

Keywords: Initial public offerings, seasoned equity offerings, gross spreads, Hong Kong

JEL Classification: G24, L10

Suggested Citation

Huang, Pinghsun and Butler, Alexander W., On the Uniformity of Investment Banking Spreads: The Seven Percent Solution is Not Unique (June 12, 2002). Available at SSRN: https://ssrn.com/abstract=318480 or http://dx.doi.org/10.2139/ssrn.318480

Pinghsun Huang (Contact Author)

National Cheng Kung University ( email )

1 Ta-Hsueh Road
Tainan, 701
Taiwan
+886 6 275 7575 ext 53441 (Phone)
+886 6 274 4104 (Fax)

Alexander W. Butler

Rice University - Jesse H. Jones Graduate School of Business ( email )

MS 531
Houston, TX 77005
United States
713-348-6341 (Phone)

HOME PAGE: http://www.owlnet.rice.edu/~awbutler/

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