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 stockoriented EASDAQ and Frankfurt Neuer Markt exchanges. IPOs involving a US bulge bracket underwriter (for joint USaEurope listings) or bookbuilding are characterised by relatively higher spreads.
This paper examines the division of fees within the IPO underwriting syndicate using data on 4,186 US IPOs in the 1990s. Like the 7% gross spread, the standard contract of 20% management fee, 20% underwriting fee, and 60% selling concession has become more common in recent years. There exists, however, significant variation from these standard percentages. The percentage of the total spread paid as selling concessions increases with offering size. This result is attributed to differential economies of scale in managing and underwriting an IPO versus selling it and to differences in bargaining power. This paper has benefited greatly from helpful comments by an anonymous referee, the Editors, Matti Keloharju, Kenneth Högholm, Antti Kanto, Inmoo Lee, and the participants of the GSFFA seminar in Helsinki. I wish to thank Harri Toivonen for assistance with the data. I would also like to thank the practitioners who participated in the survey.
We analyze whether European firms choose to list shares in the US to facilitate acquisitions. Evidence from a sample of 547 European companies shows that cross‐listed firms are significantly more active in acquiring US companies than are their domestically listed peers. This pattern holds even after we account for self‐selection in the cross‐listing decision. Cross‐listed firms are also more likely to use equity payment in large transactions, but after taking self‐selection into account, transaction size becomes the key determinant of the use of equity. After cross‐listing, the proportion of aggregate M&A volume financed with equity increases.
We analyze whether European firms choose to list shares in the US to facilitate acquisitions. Evidence from a sample of 547 European companies shows that cross‐listed firms are significantly more active in acquiring US companies than are their domestically listed peers. This pattern holds even after we account for self‐selection in the cross‐listing decision. Cross‐listed firms are also more likely to use equity payment in large transactions, but after taking self‐selection into account, transaction size becomes the key determinant of the use of equity. After cross‐listing, the proportion of aggregate M&A volume financed with equity increases.
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