Evidence of Information Spillovers in the Production of Investment Banking Services

43 Pages Posted: 7 Sep 2001

See all articles by Lawrence M. Benveniste

Lawrence M. Benveniste

University of Minnesota - Twin Cities - Carlson School of Management

Alexander Ljungqvist

Centre for Economic Policy Research (CEPR); Swedish House of Finance; European Corporate Governance Institute (ECGI)

Xiaoyun Yu

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF); European Corporate Governance Institute (ECGI); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER); China Academy of Financial Research (CAFR)

William J. Wilhelm

University of Virginia - McIntire School of Commerce

Multiple version iconThere are 5 versions of this paper

Abstract

We present evidence that firms attempting IPOs learn from the experience of their contemporaries. These information spillovers affect revisions in offer terms and the decision whether to carry through with an offering. The evidence also supports the argument that IPOs are implicitly bundled as a means of promoting more equitable sharing of information production costs. One apparent consequence of this behavior is that while initial returns and IPO volume are positively correlated in the aggregate, the correlation is negative among contemporaneous offerings subject to a common valuation factor. These findings are consistent with the Benveniste, Busaba, and Wilhelm (2001) argument that the dynamics of volume and initial returns in primary equity markets reflect, at least in part, an institutional response to information externalities.

Keywords: Initial Public Offerings, investment banking, information externalities, going public decision

JEL Classification: G32, G24

Suggested Citation

Benveniste, Lawrence M. and Ljungqvist, Alexander and Ljungqvist, Alexander and Yu, Xiaoyun and Wilhelm, William J., Evidence of Information Spillovers in the Production of Investment Banking Services. Available at SSRN: https://ssrn.com/abstract=282289 or http://dx.doi.org/10.2139/ssrn.282289

Lawrence M. Benveniste

University of Minnesota - Twin Cities - Carlson School of Management ( email )

321 19th Avenue South
774 Management and Economics
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United States
612-624-4563 (Phone)
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Alexander Ljungqvist

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
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Belgium

Xiaoyun Yu (Contact Author)

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF) ( email )

Shanghai Jiao Tong University
211 West Huaihai Road
Shanghai, 200030
China

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER) ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

China Academy of Financial Research (CAFR)

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Shanghai P.R.China, 200030
China

William J. Wilhelm

University of Virginia - McIntire School of Commerce ( email )

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Charlottesville, VA 22904-4173
United States
434-924-7666 (Phone)
434-924-7074 (Fax)

HOME PAGE: http://gates.comm.virginia.edu/wjw9a/

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