Differences between European and American IPO Markets

Abstract

This brief survey discusses recent developments in the European initial public offering (IPO) market. The spectacular rise and fall of the Euro NM markets and the growth of bookbuilding as a procedure for pricing and allocating IPOs are two important patterns. Gross spreads are lower and less clustered than in the USA. Unlike the USA, some European IPOs, especially those in Germany, have when-issued trading prior to the final setting of the offer price. Current research includes empirical studies on the valuation of IPOs and both theoretical and empirical work on the determinants of short-run underpricing.

Strategic and institutional effects on foreign IPO performance: Examining the impact of country of origin, corporate governance, and host country effects

“…Researchers have looked at a wide assortment of organizational, and extra-organizational attributes that serve as important cues regarding the quality of a firm at IPO and lessen the likelihood managers would need to reduce the offer price in order to attract investors (e.g., Beatty, 1989;Carter and Manaster, 1990;Ritter, 2003). Governance characteristics are a particularly potent signal that investors consider when making decisions about the firm's ability to deal with information asymmetries and associated agency costs (e.g., Certo et al, 2001;Filatotchev and Bishop, 2002;Sanders and Boivie, 2004).…”

Foreign IPO capital market choice: Understanding the institutional fit of corporate governance

“…Indeed, Brau and price range, has been filed. During the registration period, and for 40 days after the IPO (the 'quiet period'), the company and its advisors are able to present statements of fact, but are not allowed to publish any opinions regarding the valuation of the company (Ritter, 2003). Because of the highly regulated approach to information building associated with new listings, the reputation and ex post monitoring by highly prestigious underwriters in the U.S. are particularly important in dealing with both adverse selection and moral hazard problems associated with new issues.…”

CEOs and CFOs on IPOs: The Process and Success of Going Public

“…Analyst coverage was never explicitly mentioned as a primary concern. This contrasts with US practice (Krigman et al 2001;Brau and Fawcett 2006a;Francis et al 2010), and may explain why "there is relatively little research using European data examining the role of analysts in the IPO process" (Ritter 2003b).…”