Quid Pro Quo in IPO Auctions

40 Pages Posted: 12 Jan 2021 Last revised: 25 Apr 2021

See all articles by Yao-Min Chiang

Yao-Min Chiang

National Taiwan University - Department of Finance

Jingbin He

School of Management and Economics, University of Electronic Science and Technology of China

Bo Liu

School of Management & Economics, University of Electronic Science and Technology of China (UESTC)

Hong Zou

The University of Hong Kong - Faculty of Business and Economics

Date Written: December 7, 2020

Abstract

Is there quid pro quo in auctioned IPOs - an alternative to bookbuilding in U.S. and elsewhere? Using proprietary data on uniform-pricing IPO auctions from China, we show when the share allocation rule shifted from pro rata to lottery draw (that makes quid pro quo valuable to a bidder), fund families having pre-shift stronger commission ties with the underwriter submit bids later, place more strategic and accurate bids, have more bids qualified for the allocation round, and are more likely to receive share allocation than other fund families. The evidence supports quid pro quo facilitated by the underwriter’s leakage of privileged bidding information.

Keywords: uniform price; auction; quid pro quo; underwriter favoritism

JEL Classification: G24, G28, G32

Suggested Citation

Chiang, Yao-Min and He, Jingbin and Liu, Bo and Zou, Hong, Quid Pro Quo in IPO Auctions (December 7, 2020). Available at SSRN: https://ssrn.com/abstract=3743864 or http://dx.doi.org/10.2139/ssrn.3743864

Yao-Min Chiang (Contact Author)

National Taiwan University - Department of Finance ( email )

No.1 Sec. 4, Roosevelt Rd.
Taipei, 10605
Taiwan
+886 -2 -33661089 (Phone)

Jingbin He

School of Management and Economics, University of Electronic Science and Technology of China ( email )

Xiyuan Avenue #2006, Chengdu, Sichuan, China
Chengdu, Sichuan 611731
China

Bo Liu

School of Management & Economics, University of Electronic Science and Technology of China (UESTC) ( email )

No.2006, Xiyuan Ave
West Hi-Tech Zone
Chengdu, Si Chuan 611731
China

Hong Zou

The University of Hong Kong - Faculty of Business and Economics ( email )

China

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