Global integration in primary equity markets: the role of U.S. banks and U.S. investors
We examine the costs and benefits of the global integration of primary equity markets associated with the parallel diffusion of U.S. underwriting methods. We analyze both direct and indirect costs (associated with underpricing) using a unique dataset of 2,143 IPOs by non-U.S. issuers from 65 countri...
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| Format: | Working paper |
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University of Oxford
2001
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| _version_ | 1826277255222919168 |
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| author | Jenkinson, T Wilhelm, W Ljungqvist, A |
| author_facet | Jenkinson, T Wilhelm, W Ljungqvist, A |
| author_sort | Jenkinson, T |
| collection | OXFORD |
| description | We examine the costs and benefits of the global integration of primary equity markets associated with the parallel diffusion of U.S. underwriting methods. We analyze both direct and indirect costs (associated with underpricing) using a unique dataset of 2,143 IPOs by non-U.S. issuers from 65 countries in 1992-1999. Bookbuilding typically costs twice as much as a fixed-price offer, but on its own, does not lead to lower underpricing. However, when conducted by U.S. banks and/or targeted at U.S. investors, bookbuilding can reduce underpricing significantly, relative to fixed-price offerings or bookbuilding efforts conducted by 'local' banks. Compared to estimates of the benefit of secondary-market integration, the effects we find are substantially larger. These results are obtained after allowing for the endogeneity and interdependence of issuers' choices. For the great majority of issuers, the gains associated with lower underpricing outweighed the additional costs associated with hiring U.S. banks or marketing in the U.S. This suggests a quality/price trade-off contrasting with the findings of Chen and Ritter [Journal of Finance 55, 2000], particularly since non-U.S. issuers raising US$20m-80m also typically pay a 7% spread when U.S. banks and investors are involved. |
| first_indexed | 2024-03-06T23:26:09Z |
| format | Working paper |
| id | oxford-uuid:6a714cb6-1f26-4ef6-a886-a2f01d3b90bf |
| institution | University of Oxford |
| last_indexed | 2024-03-06T23:26:09Z |
| publishDate | 2001 |
| publisher | University of Oxford |
| record_format | dspace |
| spelling | oxford-uuid:6a714cb6-1f26-4ef6-a886-a2f01d3b90bf2022-03-26T18:57:28ZGlobal integration in primary equity markets: the role of U.S. banks and U.S. investorsWorking paperhttp://purl.org/coar/resource_type/c_8042uuid:6a714cb6-1f26-4ef6-a886-a2f01d3b90bfBulk import via SwordSymplectic ElementsUniversity of Oxford2001Jenkinson, TWilhelm, WLjungqvist, AWe examine the costs and benefits of the global integration of primary equity markets associated with the parallel diffusion of U.S. underwriting methods. We analyze both direct and indirect costs (associated with underpricing) using a unique dataset of 2,143 IPOs by non-U.S. issuers from 65 countries in 1992-1999. Bookbuilding typically costs twice as much as a fixed-price offer, but on its own, does not lead to lower underpricing. However, when conducted by U.S. banks and/or targeted at U.S. investors, bookbuilding can reduce underpricing significantly, relative to fixed-price offerings or bookbuilding efforts conducted by 'local' banks. Compared to estimates of the benefit of secondary-market integration, the effects we find are substantially larger. These results are obtained after allowing for the endogeneity and interdependence of issuers' choices. For the great majority of issuers, the gains associated with lower underpricing outweighed the additional costs associated with hiring U.S. banks or marketing in the U.S. This suggests a quality/price trade-off contrasting with the findings of Chen and Ritter [Journal of Finance 55, 2000], particularly since non-U.S. issuers raising US$20m-80m also typically pay a 7% spread when U.S. banks and investors are involved. |
| spellingShingle | Jenkinson, T Wilhelm, W Ljungqvist, A Global integration in primary equity markets: the role of U.S. banks and U.S. investors |
| title | Global integration in primary equity markets: the role of U.S. banks and U.S. investors |
| title_full | Global integration in primary equity markets: the role of U.S. banks and U.S. investors |
| title_fullStr | Global integration in primary equity markets: the role of U.S. banks and U.S. investors |
| title_full_unstemmed | Global integration in primary equity markets: the role of U.S. banks and U.S. investors |
| title_short | Global integration in primary equity markets: the role of U.S. banks and U.S. investors |
| title_sort | global integration in primary equity markets the role of u s banks and u s investors |
| work_keys_str_mv | AT jenkinsont globalintegrationinprimaryequitymarketstheroleofusbanksandusinvestors AT wilhelmw globalintegrationinprimaryequitymarketstheroleofusbanksandusinvestors AT ljungqvista globalintegrationinprimaryequitymarketstheroleofusbanksandusinvestors |