RFS Advance Access originally published online on August 26, 2008
Review of Financial Studies 2009 22(4):1477-1504; doi:10.1093/rfs/hhn079
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IPO Pricing and Allocation: A Survey of the Views of Institutional Investors
Saïd Business School, Oxford University and CEPR
Saïd Business School, Oxford University
Send correspondence to Tim Jenkinson, Saïd Business School, Park End Street, Oxford OX1 1HP, UK; telephone: +44-(0)1865-288916; fax: +44-(0)1865-288805. E-mail: tim.jenkinson{at}sbs.ox.ac.uk
JEL Classification: G23, G24
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Abstract |
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Despite the central importance of investors to all initial public offering (IPO) theories, relatively little is known about their role in practice. This article is based on a survey of how institutional investors assess IPOs, what information they provide to the investment banking syndicate, and the factors they believe influence allocations. We find that investor characteristics, in particular brokerage relationships with the bookrunner, are perceived to be the most important factors influencing allocations, which supports the view that IPO allocations are part of implicit quid pro quo deals with investment banks. The survey raises doubts as to the extent of information production or revelation.
We are very grateful to the Investment Management Association, in particular Tina Johnson, Jane Lowe, and Gordon Midgely, and to the Alternative Investment Management Association, in particular Mary Richardson and Emma Mugridge, for their support in distributing and promoting the survey to their members. We would also like to thank all the respondents to the survey. We received useful comments from two anonymous referees, Alan Morrison, and seminar participants at the Swedish Institute for Financial Research and the 2007 AFA conference.