Gondat-Larralde, Celine and James, Kevin R. (2004) Block-booking and IPO share allocation: the importance of being ignorant. Financial Markets Group Discussion Papers (480). Financial Markets Group, The London School of Economics and Political Science, London, UK.
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Abstract
Given the opportunity to buy IPO shares of uncertain value at a fixed price, potentially informed investors have an incentive to refuse to participate in offerings the underwriter happens to overprice. We show that an underwriter can efficiently resolve this problem by entering into a repeat game with a stable coalition of investors who agree to participate in all of the bank’s IPOs (block-booking). Using a unique data-set consisting of UK transaction records that enables us to identify original investors for all large UK IPOs between 1997 and 2000, we find strong empirical support for this implication.
| Item Type: | Monograph (Discussion Paper) |
|---|---|
| Official URL: | http://fmg.ac.uk |
| Additional Information: | © 2004 The Authors |
| Divisions: | Financial Markets Group |
| Subjects: | H Social Sciences > HG Finance H Social Sciences > HB Economic Theory |
| JEL classification: | D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure G - Financial Economics > G1 - General Financial Markets > G18 - Government Policy and Regulation G - Financial Economics > G2 - Financial Institutions and Services > G24 - Investment Banking; Venture Capital; Brokerage; Rating Agencies |
| Date Deposited: | 30 Jul 2009 15:27 |
| Last Modified: | 11 Dec 2024 18:38 |
| URI: | http://eprints.lse.ac.uk/id/eprint/24678 |
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