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Gentlemanly capitalism revisited: a case study of the underpricing of Initial Public Offerings on the London Stock Exchange, 1946-86

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  • David Chambers

    (University of Oxford)

Abstract

"Allegations of British capital market failure are numerous, range from claims of domestic investor bias before 1914 to charges of short-termism against institutional investors towards the end of the last century, and are frequently contentious. This paper revisits this literature by pointing to the post-1945 market for initial public offerings (IPO) as a clear instance of capital market failure. Despite the tender offer delivering substantially lower underpricing than traditional IPO methods, it was adopted by only 1 in 12 firms going public. This missed opportunity cost issuing firms between £600 million and £1.3 billion in IPO proceeds forgone between 1960 and 1986 at 2005 prices, excluding privatisations, and can be attributed to a lack of competition among issuing houses and brokers before Big Bang."

Suggested Citation

  • David Chambers, 2006. "Gentlemanly capitalism revisited: a case study of the underpricing of Initial Public Offerings on the London Stock Exchange, 1946-86," Working Papers 6016, Economic History Society.
    • Handle: RePEc:ehs:wpaper:6016
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    References listed on IDEAS

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    Cited by:

    1. David Chambers, 2007. "New issues, New Industries and Firm Survival in Interwar Britain," Working Papers 7002, Economic History Society.

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    More about this item

    Keywords

    IPO; British capital market failure; tender offer; auction; underpricing;
    All these keywords.

    JEL classification:

    • N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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