Evidence of Information Spillovers in the Production of Investment Banking Services |
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| Authors: | Lawrence M Benveniste Alexander Ljungqvist William J Wilhelm Jr Xiaoyun Yu |
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| Institution: | University of Minnesota Carlson School of Management;New York University Stern School of Business and the Centre for Economic Policy Research, London;Oxford University Saïd Business School and the University of Virginia McIntire School of Commerce;Indiana University Kelly School of Business |
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| Abstract: | We provide evidence that firms attempting IPOs condition offer terms and the decision whether to carry through with an offering on the experience of their primary market contemporaries. Moreover, 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. Our findings are consistent with investment banks implicitly bundling offerings subject to a common valuation factor to achieve more equitable internalization of information production costs and thereby preventing coordination failures in primary equity markets. |
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