Auctions vs. bookbuilding and the control of underpricing in hot IPO markets

• 成果类型: Article
• 署名作者: Derrien, F; Womack, KL
• 署名单位: Dartmouth College; University of Toronto
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/16.1.31
• 发表日期: 2003
• 页码: 31
• 关键词: initial public offerings; OWNERSHIP; price

摘要

Market returns before the offer price is set affect the amount and variability of initial public offering (IPO) underpricing. Thus an important question is What IPO procedure is best adapted for controlling underpricing in hot versus cold market conditions? The French stock market offers a unique arena for empirical research on this topic, since three substantially different issuing mechanisms (auctions, bookbuilding, and fixed price) are used there. Using 1992-1998 data, we find that the auction mechanism is associated with less underpricing and lower variance of underpricing. We show that the auction procedure's ability to incorporate more information from recent market conditions into the IPO price is an important reason.