Has the introduction of bookbuilding
increased the efficiency of international IPOs?
Alexander Ljungqvist, Tim Jenkinson, William Wilhelm
By 1999, close to 80% of non-U.S. IPOs were marketed
using bookbuilding methods. We study whether the recent introduction of
this technology by U.S. banks and their inclusion in non-U.S. IPO
syndicates has promoted efficiency in primary equity markets. We analyze
both direct and indirect costs (associated with underpricing) using a
unique dataset containing information on 2,051 initial public offerings in
61 non-U.S. markets during the period 1992-1999. The direct costs of
bookbuilding are typically twice as large as direct costs for fixed-price
offers. However, bookbuilding leads to substantially less underpricing.
This benefit is more pronounced when the target market includes U.S.
investors, when U.S. listing is sought and when U.S. banks are part of the
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