EconPapers    
Economics at your fingertips  
 

Analyst Hype in IPOs: Explaining the Popularity of Bookbuilding

Francois Derrien (), Francois Degeorge () and Kent Womack

Post-Print from HAL

Abstract: The bookbuilding procedure for selling initial public offerings (IPO) to investors has captured significant market share from auction alternatives in recent years, despite the significantly lower costs related to the auction mechanism in terms of direct fees and initial underpricing. This article shows that in the French market, where the frequency of bookbuilding and auctions was approximately equal in the 1990s, the ostensible advantages to the issuer using bookbuilding were advertising-related benefits. Specifically, we find that book-built issues were more likely to be followed and positively recommended by the lead underwriters, as well as to receive "booster shots" after issuance if the shares had fallen. Even nonunderwriters' analysts appear to promote book-built issues more but only as a way of currying favor with the IPO underwriter for allocations of future deals. Yet we do not observe valuation or post-IPO return differentials that suggest these types of promotion have any value to the issuing firm. We conclude that underwriters using the bookbuilding procedure have convinced issuers of the questionable value of the advertising and promotion of their shares

Keywords: IPO; book-building; auctions (search for similar items in EconPapers)
Date: 2007-07
References: Add references at CitEc
Citations: View citations in EconPapers (27)

Published in Review of Financial Studies, 2007, Vol.20, n°4, pp.1021-1058. ⟨10.1093/rfs/hhm010⟩

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

Related works:
Journal Article: Analyst Hype in IPOs: Explaining the Popularity of Bookbuilding (2007) Downloads
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-00480839

DOI: 10.1093/rfs/hhm010

Access Statistics for this paper

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

 
Page updated 2025-03-22
Handle: RePEc:hal:journl:hal-00480839