Gentlemanly capitalism revisited: a case study of the underpricing of Initial Public Offerings on the London Stock Exchange, 1946-86

David Chambers ()
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David Chambers: University of Oxford

No 6016, Working Papers from Economic History Society

Abstract: "Allegations of British capital market failure are numerous, range from claims of domestic investor bias before 1914 to charges of short-termism against institutional investors towards the end of the last century, and are frequently contentious. This paper revisits this literature by pointing to the post-1945 market for initial public offerings (IPO) as a clear instance of capital market failure. Despite the tender offer delivering substantially lower underpricing than traditional IPO methods, it was adopted by only 1 in 12 firms going public. This missed opportunity cost issuing firms between £600 million and £1.3 billion in IPO proceeds forgone between 1960 and 1986 at 2005 prices, excluding privatisations, and can be attributed to a lack of competition among issuing houses and brokers before Big Bang."

Keywords: "IPO; British capital market failure; tender offer; auction; underpricing" (search for similar items in EconPapers)
JEL-codes: G24 G34 N24 (search for similar items in EconPapers)
Date: 2006-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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