IPO Underpricing and Aftermarket Price Accuracy: Auctions vs. Bookbuilding in Japan

Timo Lehmann and Matthias Weber

No sa385, SocArXiv from Center for Open Science

Abstract: We analyse a regulatory change in the Japanese IPO market that created an abrupt shift from hybrid price-discriminatory auctions to bookbuilding. We find that bookbuilding leads to significantly higher underpricing than hybrid price-discriminatory auctions. Further, we find evidence that price accuracy tends to be higher for auctions than for bookbuilding. The results hold under a variety of OLS specifications and with regression discontinuity designs exploiting the abrupt change of the regulation. The results suggest that the interests of issuers and underwriters are not aligned. The popularity of bookbuilding seems puzzling from this perspective.

Date: 2021-01-05
New Economics Papers: this item is included in nep-des
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:sa385

DOI: 10.31219/osf.io/sa385

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