What Determines IPO Gross Spreads in Europe?

This paper examines the behaviour of underwriting gross spreads in European IPO markets using a data set of 565 IPOs by European issuers in the period 1986–99. Privatisations have lower gross spreads than other IPOs, other things remaining equal. Gross spreads on European listings by European issuers are significantly lower than on US listings by European issuers, except on the technology stock–oriented EASDAQ and Frankfurt Neuer Markt exchanges. IPOs involving a US bulge bracket underwriter (for joint US/Europe listings) or bookbuilding are characterised by relatively higher spreads.