Auctions vs. Book-building and the Control of Underpricing in Hot IPO Markets

Francois Derrien () and Kent Womack

Post-Print from HAL

Abstract: Market returns before the offer price is set affect the amount and variability of initial public offering (IPO) underpricing. Thus an important question is "What IPO procedure is best adapted for controlling underpricing in "hot" versus "cold" market conditions?" The French stock market offers a unique arena for empirical research on this topic, since three substantially different issuing mechanisms (auctions, bookbuilding, and fixed price) are used there. Using 1992-1998 data, we find that the auction mechanism is associated with less underpricing and lower variance of underpricing. We show that the auction procedure's ability to incorporate more information from recent market conditions into the IPO price is an important reason.

Keywords: Book-building; Auctions; IPO Markets (search for similar items in EconPapers)
Date: 2003
References: Add references at CitEc
Citations: View citations in EconPapers (97)

Published in Review of Financial Studies, 2003, Vol.16, n°1, pp.31-61. ⟨10.1093/rfs/16.1.31⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Auctions vs. Bookbuilding and the Control of Underpricing in Hot IPO Markets (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00480242

DOI: 10.1093/rfs/16.1.31

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().