Why don't issuers choose IPO auctions?
Subtitle: the complexity of indirect mechanisms
By: Ravi Jagannathan, Andrei Jirnyi, Ann Sherman
Contributors: Jirnyi, Andrei; Sherman, Ann; National Bureau of Economic Research
Series: NBER working paper series -- working paper 16214; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16214.
Publisher: National Bureau of Economic Research
Published: 2010
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource]
Description: "At least 25 countries have used IPO auctions, but most have since abandoned them.  We argue that this is because auctions, being indirect mechanisms, require a level of sophistication above that of many investors.  Through suitably calibrated examples, we show that even sophisticated investors can make mistakes while bidding in auctions, especially when facing uncertainty about the number and type of bidders, and such mistakes impose costs on other participants.  We provide empirical support for our arguments.  IPO auctions have been plagued by unexpectedly large fluctuations in the number of participants, return chasing investors, and high-bidding free riders.  Our analysis suggests that a direct mechanism that resembles a transparent version of book building would be preferable to auctions"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 9/2/2010.

Includes bibliographical references.

Also available in print.

System requirements: Adobe Acrobat Reader.

Mode of access: World Wide Web.