Evidence of Information Spillovers in the Production of
Investment Banking Services
Lawrence M. Benveniste,
Alexander Ljungqvist, William
J. Wilhelm, Xiaoyun Yu
Abstract
We provide evidence that firms attempting IPOs condition
offer terms and the decision whether to carry through with an offering on
the experience of their primary market contemporaries. Moreover, while
initial returns and IPO volume are positively correlated in the aggregate,
the correlation is negative among contemporaneous offerings subject to a
common valuation factor. Our findings are consistent with investment banks
implicitly bundling offerings subject to a common valuation factor to
achieve more equitable internalization of information production costs and
thereby preventing coordination failures in primary equity markets.
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