Auctions versus book building of Japanese IPOs

Takashi Kaneko; Richard H. Pettway

doi:10.1016/S0927-538X(03)00049-0

Auctions versus book building of Japanese IPOs

Takashi Kaneko, Richard H. Pettway

Department of Business and Commerce

Research output: Contribution to journal › Article › peer-review

46 Citations (Scopus)

Abstract

With the spread of U.S.-style book building, auctions have become less popular as IPO pricing mechanisms in the world. Does book building provide a better mechanism for issuing firms than auctions? Japan provides an interesting laboratory to compare investor-priced IPOs using price-competitive auctions with those of underwriter-priced IPOs using book building. Our analysis finds that, after controlling for ex ante uncertainty variables and other issue and company variables, the initial returns of book building IPOs are significantly higher than those of auctions, especially during hot markets. IPO firms "left more money on the table" using book building compared to auctions.

Original language	English
Pages (from-to)	439-462
Number of pages	24
Journal	Pacific Basin Finance Journal
Volume	11
Issue number	4
DOIs	https://doi.org/10.1016/S0927-538X(03)00049-0
Publication status	Published - 2003 Aug

Keywords

Auctions
IPOs
Investment banking
Underwriting

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/S0927-538X(03)00049-0

Cite this

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title = "Auctions versus book building of Japanese IPOs",

abstract = "With the spread of U.S.-style book building, auctions have become less popular as IPO pricing mechanisms in the world. Does book building provide a better mechanism for issuing firms than auctions? Japan provides an interesting laboratory to compare investor-priced IPOs using price-competitive auctions with those of underwriter-priced IPOs using book building. Our analysis finds that, after controlling for ex ante uncertainty variables and other issue and company variables, the initial returns of book building IPOs are significantly higher than those of auctions, especially during hot markets. IPO firms {"}left more money on the table{"} using book building compared to auctions.",

keywords = "Auctions, IPOs, Investment banking, Underwriting",

author = "Takashi Kaneko and Pettway, {Richard H.}",

note = "Funding Information: We wish to thank Alexander Ljungqvist, Jay Ritter, Ann Sherman, Kent Womack, and commend Shaorong Zhang and Ravi Jain, PhD candidates at the University of Missouri-Columbia, for all their programming assistance. We also want to thank anonymous referees and many reviewers for providing detailed and very helpful suggestions as we have developed this manuscript. Kaneko acknowledges the financial support from the Keio University COE project funded by the Japanese Ministry of Education. Pettway thanks the Financial Research Institute at the University of Missouri-Columbia for financial support.",

year = "2003",

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doi = "10.1016/S0927-538X(03)00049-0",

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N1 - Funding Information: We wish to thank Alexander Ljungqvist, Jay Ritter, Ann Sherman, Kent Womack, and commend Shaorong Zhang and Ravi Jain, PhD candidates at the University of Missouri-Columbia, for all their programming assistance. We also want to thank anonymous referees and many reviewers for providing detailed and very helpful suggestions as we have developed this manuscript. Kaneko acknowledges the financial support from the Keio University COE project funded by the Japanese Ministry of Education. Pettway thanks the Financial Research Institute at the University of Missouri-Columbia for financial support.

PY - 2003/8

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N2 - With the spread of U.S.-style book building, auctions have become less popular as IPO pricing mechanisms in the world. Does book building provide a better mechanism for issuing firms than auctions? Japan provides an interesting laboratory to compare investor-priced IPOs using price-competitive auctions with those of underwriter-priced IPOs using book building. Our analysis finds that, after controlling for ex ante uncertainty variables and other issue and company variables, the initial returns of book building IPOs are significantly higher than those of auctions, especially during hot markets. IPO firms "left more money on the table" using book building compared to auctions.

AB - With the spread of U.S.-style book building, auctions have become less popular as IPO pricing mechanisms in the world. Does book building provide a better mechanism for issuing firms than auctions? Japan provides an interesting laboratory to compare investor-priced IPOs using price-competitive auctions with those of underwriter-priced IPOs using book building. Our analysis finds that, after controlling for ex ante uncertainty variables and other issue and company variables, the initial returns of book building IPOs are significantly higher than those of auctions, especially during hot markets. IPO firms "left more money on the table" using book building compared to auctions.

KW - Auctions

KW - IPOs

KW - Investment banking

KW - Underwriting

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JF - Pacific Basin Finance Journal

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Auctions versus book building of Japanese IPOs

Abstract

Keywords

ASJC Scopus subject areas

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