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What Determines IPO Gross Spreads in Europe?

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  • Sami Torstila

Abstract

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.

Suggested Citation

  • Sami Torstila, 2001. "What Determines IPO Gross Spreads in Europe?," European Financial Management, European Financial Management Association, vol. 7(4), pages 523-541, December.
    • Handle: RePEc:bla:eufman:v:7:y:2001:i:4:p:523-541
    DOI: 10.1111/1468-036X.00169
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    Cited by:

    1. Gozzi, Juan Carlos & Levine, Ross & Schmukler, Sergio L., 2010. "Patterns of international capital raisings," Journal of International Economics, Elsevier, vol. 80(1), pages 45-57, January.
    2. Hsuan‐Chi Chen & Robert C. W. Fok & Yu‐Jen Wang, 2006. "Why do Underwriters Charge Low Underwriting Fees for Initial Public Offerings in Taiwan?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(7‐8), pages 979-1005, September.
    3. Franck Bancel & Usha R. Mittoo, 2013. "Survey evidence: what do we know about European and US firms’ motivations for going public?," Chapters, in: Mario Levis & Silvio Vismara (ed.), Handbook of Research on IPOs, chapter 3, pages 57-75, Edward Elgar Publishing.
    4. Hao, (Grace) Qing, 2011. "Securities litigation, withdrawal risk and initial public offerings," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 438-456, June.
    5. Ranajit Kumar Bairagi & William Dimovski, 2012. "The direct costs of raising external equity capital for US REIT IPOs," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 30(6), pages 538-562, September.
    6. Huyghebaert, Nancy & Xu, Weidong, 2015. "What determines the market share of investment banks in Chinese domestic IPOs?," China Economic Review, Elsevier, vol. 34(C), pages 150-168.
    7. Douglas Cumming & Sofia Johan, 2006. "Is it the Law or the Lawyers? Investment Covenants around the World," European Financial Management, European Financial Management Association, vol. 12(4), pages 535-574, September.
    8. Christoph Kaserer & Marcus Kraft, 2003. "How Issue Size, Risk, and Complexity are Influencing External Financing Costs: German IPOs Analyzed from an Economies of Scale Perspective," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(3‐4), pages 479-512, April.
    9. John Board & Alfonso Dufour & Charles Sutcliffe & Stephen Wells, 2005. "A False Perception? The relative riskiness of AIM and listed Stocks," ICMA Centre Discussion Papers in Finance icma-dp2006-01, Henley Business School, University of Reading.
    10. Fernando, Chitru S. & Gatchev, Vladimir A. & May, Anthony D. & Megginson, William L., 2015. "Prestige without purpose? Reputation, differentiation, and pricing in U.S. equity underwriting," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 41-63.
    11. Hafiz Hoque, 2022. "Endogenous market choice, listing regulations and IPO spread: Evidence from the London Stock Exchange," Working Papers 2022-02, Swansea University, School of Management.
    12. Franck Bancel & Usha R. Mittoo, 2009. "Why Do European Firms Go Public?," European Financial Management, European Financial Management Association, vol. 15(4), pages 844-884, September.
    13. Hafiz Hoque & John Doukas, 2024. "Endogenous market choice, listing regulations, and IPO spread: Evidence from the London Stock Exchange," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 2360-2380, April.
    14. Trauten, Andreas, 2004. "Zur Effizienz von Wertpapieremissionen über Internetplattformen," Working Papers 8, University of Münster, Competence Center Internet Economy and Hybrid Systems, European Research Center for Information Systems (ERCIS).
    15. Jay R. Ritter, 2003. "Differences between European and American IPO Markets," European Financial Management, European Financial Management Association, vol. 9(4), pages 421-434, December.
    16. Chen, Hsuan-Chi & Fauver, Larry & Yang, Pei-Ching, 2009. "What do investment banks charge to underwrite American Depositary Receipts?," Journal of Banking & Finance, Elsevier, vol. 33(4), pages 609-618, April.
    17. Katrin Migliorati & Stefano Paleari, 2013. "The underwriters of IPOs in Europe’s second markets," Chapters, in: Mario Levis & Silvio Vismara (ed.), Handbook of Research on IPOs, chapter 12, pages 237-254, Edward Elgar Publishing.
    18. Yue Cai, 2021. "Measuring Market Power in the IPO Underwriter," Working Papers 2108, Waseda University, Faculty of Political Science and Economics.
    19. Katrin Migliorati & Silvio Vismara, 2014. "Ranking Underwriters of European IPOs," European Financial Management, European Financial Management Association, vol. 20(5), pages 891-925, November.

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