Auctions versus book building of Japanese IPOs

Takashi Kaneko, Richard H. Pettway

Research output: Contribution to journalArticle

38 Citations (Scopus)

Abstract

With the spread of U.S.-style book building, auctions have become less popular as IPO pricing mechanisms in the world. Does book building provide a better mechanism for issuing firms than auctions? Japan provides an interesting laboratory to compare investor-priced IPOs using price-competitive auctions with those of underwriter-priced IPOs using book building. Our analysis finds that, after controlling for ex ante uncertainty variables and other issue and company variables, the initial returns of book building IPOs are significantly higher than those of auctions, especially during hot markets. IPO firms "left more money on the table" using book building compared to auctions.

Original languageEnglish
Pages (from-to)439-462
Number of pages24
JournalPacific Basin Finance Journal
Volume11
Issue number4
DOIs
Publication statusPublished - 2003 Aug 1

Keywords

  • Auctions
  • IPOs
  • Investment banking
  • Underwriting

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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