Quid Pro Quo?
What Factors Influence IPO Allocations to Investors?
46 PagesPosted: 9 Mar 2017Last revised: 5 Sep 2017
Date Written: June 21, 2017
With data from all the leading international investment banks on 220 IPOs raising $160bn, we test the determinants of IPO allocations. We compare investors’ IPO allocations with proxies for their information production during the bookbuilding and the broking (and other) revenues those investors generate for bookrunners.
Investing in Initial Public Offerings (IPOs)
We find evidence consistent with information revelation theories. We also find strong support for the existence of a quid pro quo: broking revenues are a significant driver of investors’ IPO allocations and profits.
The quid pro quo remains when we control for any unobserved investor characteristics and investor-bank relationships.
Keywords: Initial public offerings, allocations, conflicts of interest
JEL Classification: G30, G24
Suggested Citation:Suggested Citation
Jenkinson, Tim and Jones, Howard and Suntheim, Felix, Quid Pro Quo? What Factors Influence IPO Allocations to Investors? (June 21, 2017).
Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2785642 or http://dx.doi.org/10.2139/ssrn.2785642