Does Bookbuilding Improve the IPO Pricing Efficiency?: An Information-based Perspective

摘要

This article investigate the pricing efficiency of initial public offerings (IPOs) for bookbuilding IPOs in China. Different from other works that discussing IPOs pricing efficiency focus on the initial underpricing of IPOs, we use the sample of IPOs in China from 2001 to 2008, providing a new perspective of the level capitalization of firm-specific information to examine the pricing efficiency. We find a significant positive relation between the degree of firm-specific information capitalized into price and the level of initial underpricing for bookbuilding IPOs. Additionally, there is no such significant relation for non-bookbuilding IPOs. The clear preponderance of the evidence suggests that bookbuilding makes the pricing of IPOs more informative, and the participation of institutional investors plays an important role in value discovery. This result is robust in multivariate analysis, where we control for other factors believed to influence underpricing.