Book Building Research Articles

Building as an economic process: the Austrian approach revisited

Bon's book Building as an Economic Process: An Introduction to Building Economics was an important step in the development of the economic theory of the built environment. The book's aim was to establish theoretical foundations for building economics, using the perspective of Austrian economics. The objective of this review is to assess the significance and impact of the book, and how successful Bon was in achieving his stated purpose. Each of the major topics in the book is discussed, with the Austrian approach as used by Bon on capital theory, the building process, and business and building cycles assessed. Bon proposed a significant research programme based on these ideas. The impact of the ideas is discussed before progress on the research programme is reviewed. The conclusion attempts to bring out the significance of the book's contribution.

Supplement to 'Why Do IPO Auctions Fail?'

This is Appendix D of the paper 'Why Do IPO Auctions Fail?' It contains information on IPO methods for 44 countries, including more details regarding our sources. We contacted stock exchanges and financial market regulators around the world, and also gathered information from academic sources and articles in the financial press. We focus on the three main IPO methods - book building, auctions and fixed price public offers - and organize the information for each country in terms of which methods are allowed, which are used and whether hybrids (combinations of two methods) are allowed or required.

Underpricing of IPOs that Follow Private Placements

This study addresses the question of the effectiveness of private placements in mitigating the information asymmetry problem faced by IPO firms, and their impacts on issuing costs, both underpricing and underwriting spreads, of IPOs. We examine the underpricing of initial public offerings by firms that made private placements prior to their IPOs (PP IPO firms). We find that PP IPOs experience significantly lower underpricing. They also have smaller offer price revisions following the book building process. Furthermore, PP IPOs are associated with more reputable underwriting syndicates and lower underwriting spreads. These findings persist after we control for known factors that impact underpricing in the regression analysis. We conclude that the results are consistent with the information asymmetry explanation for the global phenomenon of IPO underpricing, and lend support to the notion that prior private placements help reduce information asymmetry, thus resulting in lower issuing costs for IPO firms.

PHP and SQL Made Simple

The book Build Your Own Database Driven Website Using PHP & MySQL by Kevin Yank provides a hands-on look at what's involved in building a database-driven Web site. The author does a good job of patiently teaching the reader how to install and configure PHP 5 and MySQL to organize dynamic Web pages and put together a viable content management system. At just over 350 pages, the book is rather small compared to a lot of others on the topic, but it contains all the essentials. The author employs excellent teaching techniques to set up the foundation stone by stone and then grouts everything solidly together later in the book. This book aims at intermediate and advanced Web designers looking to make the leap to server-side programming. The author assumes his readers are comfortable with simple HTML. He provides an excellent introduction to PHP and MySQL (including installation) and explains how to make them work together. The amount of material he covers guarantees that almost any reader will benefit.

Global trends in IPO methods: Book building versus auctions with endogenous entry

The U.S. book-building method has become increasingly popular for initial public offerings (IPOs) worldwide over the last decade, whereas sealed-bid IPO auctions have been abandoned in nearly all of the many countries in which they have been tried. I model book building, discriminatory auctions, and uniform price auctions in an environment in which the number of investors and the accuracy of investors’ information are endogenous. Book building lets underwriters manage investor access to shares, allowing them to reduce risk for both issuers and investors and to control spending on information acquisition, thereby limiting either underpricing or aftermarket volatility. Because more control and less risk are beneficial to all issuers, the advantages of book building's allocational flexibility could explain why global patterns of issuer choice are surprisingly consistent. My models also predict that offerings with higher expected underpricing have lower expected aftermarket volatility; that an auction open to large numbers of potential bidders is vulnerable to inaccurate pricing and to fluctuations in the number of bidders; and that both book-built and auctioned IPOs will exhibit partial adjustment to both private and public information.

Why Does Book Building Drive Out Auction Methods of IPO Issuance? Evidence from Japan

We examine Japan's 1997 introduction of book building as an alternative to a previously required hybrid auction method. Despite higher cost for some issuers, all issuers in Japan now select book building. Book building enables more accurate valuation of firms, but gains from accurate valuation are partly redistributive. Thus book building can drive auction-method offerings from the market even if it yields no aggregate benefit. Compared to the auction regime, book building reduces issue costs for large issuers. Auctioning is less costly for small issuers, but appears to foreclose some small firms from issuing. The aggregate costs of book building and auctioning are similar.

Auctions versus book building of Japanese IPOs

With the spread of U.S.-style book building, auctions have become less popular as IPO pricing mechanisms in the world. Does book building provide a better mechanism for issuing firms than auctions? Japan provides an interesting laboratory to compare investor-priced IPOs using price-competitive auctions with those of underwriter-priced IPOs using book building. Our analysis finds that, after controlling for ex ante uncertainty variables and other issue and company variables, the initial returns of book building IPOs are significantly higher than those of auctions, especially during hot markets. IPO firms “left more money on the table” using book building compared to auctions.

Why Does Book Building Drive Out Auction Methods of IPO Issuance? Evidence from Japan

We examine Japan's 1997 introduction of book building as an alternative to an auction method of IPO issuance that had been required since 1989. Despite its higher total issue cost for some issuers, all issuers in Japan now select book building. In contrast to auctioning, book building enables firms to be valued more accurately. Because the gains from more accurate valuation are partly redistributive, book building can drive auction-method offerings from the market even if book building yields no aggregate benefit to issuers. Compared to Japan's prior auction regime, we find that for large, well-established issuers, book building reduces total issue cost. The auction regime is less costly for small issuers, but appears to foreclose some high-quality small firms from issuing. Although book building is more costly for small issuers, the aggregate costs of book building and auctioning in Japan are similar. Because cost estimates for auctioning do not reflect the effects of some firms not issuing and because book building yields other benefits associated with more-accurate valuation, the evidence from Japan's market experiment favors book building over auction.

Applications, Implications, Complications: Reply to Reviews by Elkind, Gerson, and Levine

The author appreciates the careful reading and thoughtful reviews by Sue Elkind, Sam Gerson, and Howard Levine. Elkind's review particularly captures and articulates many of the key ideas in the book Building Bridges: The Negotiation of Paradox in Psychoanalysis and creatively applies concepts of negotiation, paradox, an inherently multiple “distributed self,” and metaphor in her own work consulting on treatment impasses. Gerson incisively focuses on the core idea of recognizing, accepting, and bridging differences and contradictions in personal, and national, perspectives; he also articulates an understanding of the attempt of relational analytic writers to bridge the intrapsychic and the interpersonal with due recognition of each. The author replies extensively to Levine's comparison of Pizer's work with that of Semrad and other “classical” analysts and challenges Levine's premise that a relational perspective, grounded as it is in a two-person contextual psychology, ignores or devalues interpretation, insight, free association, and autonomous mental functioning. Quoting from clinical material in his book, Pizer presents the outcome of a “relational” analysis in terms of the patient's increased access to internal “potential space,” unconscious experience, curiosity, and reflectiveness about the mental life of self and other, and an increased ability to value personal experience in relationship and in solitude.

IPO Auctions: English, Dutch, … French, and Internet

Unseasoned shares are sold through the Book Building process in the United States and the United Kingdom, fixed price offerings in several countries, uniform price auctions in Israel or the new internet-based Open IPO mechanism, and an auction-like mechanism called the Mise en Vente in France. We analyze and compare the performance of these various IPO mechanisms within the context of a unified theoretical model. Fixed price offerings lead to inefficient pricing and winner's curse. Dutch auctions can also lead to inefficiencies, to the extent that they are conducive to tacit collusion by investors. The Book Building and Mise en Vente can lead to optimal information elicitation and price discovery. We document empirically the similarity between the Book Building and the Mise en Vente. We discuss the implications of our analysis for the design of optimal Internet IPO auctions. Journal of Economic Literature Classification Numbers: G24, G3, D82.

E‐Books, e‐publishers and e‐book builders for children

Children too can now take advantage of e‐book technology. E‐book titles for children are becoming popular as more and more e‐publishers are producing and selling children's books. This paper discusses and presents some of the latest e‐books initiatives for children. Firstly, e‐book definitions are explained in two categories: concept and devices. Then their formats, active e‐publishers and examples are outlined. Next, book builders that allow users to build books while maintaining the book metaphor are discussed with particular attention to a book builder designed specifically for children. Fifteen children participated in an evaluation to verify the ease of use of the selected book builder. An ease of use index was constructed from the addition of four variables: learning time, questions asked during learning, book building time and questions asked during building. Finally, this paper concludes that children are very much at ease with e‐book technology. They are able to use e‐books and e‐book builder without much effort.

Global Trends in IPO Methods: Book Building vs. Auctions with Endogenous Entry

The U.S. book building method has become increasingly popular for initial public offerings (IPOs) worldwide over the last decade, whereas sealed bid IPO auctions have been abandoned in nearly all of the many countries in which they have been tried. I model book building, discriminatory auctions and uniform price auctions in an environment where the number of investors and the accuracy of investors' information is endogenous. Book building lets underwriters manage investor access to shares, allowing them to: 1) reduce risk for both issuers and investors; and 2) control spending on information acquisition, thereby limiting either underpricing or aftermarket volatility. Since more control and less risk are beneficial to all issuers, the advantages of book building's allocational flexibility may explain why global patterns of issuer choice are surprisingly consistent. My models also predict that offerings with higher expected underpricing will have lower expected aftermarket volatility; that an auction open to large numbers of potential bidders is vulnerable to inaccurate pricing and fluctuations in the number of bidders; and that both book built and auctioned IPOs will exhibit partial adjustment to public information.

IPOs and Long Term Relationships: An Advantage of Book Building

There is a global trend in initial public offerings towards the increased use of book building, the primary US method. A key difference between book building and other methods such as auctions is that, with book building, the underwriter has total discretion in allocating shares, allowing allocations to be based on a long term relationship between the underwriter and investors. This paper extends the work of Benveniste and Spindt on the importance of a multi-period setting when analyzing book building. In a multi-period model with endogenous (and costly) information acquisition, I show that the investment bank's ability to lower underpricing depends largely on its ability to favor regular uninformed investors. Among other things, this implies that the hybrid book building/open offer IPO method which is becoming increasingly popular internationally will lead to higher underpricing than straight book building.

IPOs and Long-Term Relationships: An Advantage of Book Building

There is a global trend in initial public offerings toward the increased use of book building. Relative to other methods such as auctions, a key feature of book building is that the underwriter has total discretion in allocating shares, allowing allocations to be based on long-term relationships between underwriters and investors. In a multiperiod model with endogenous (and costly) information acquisition. I show that the underwriter's ability to lower underpricing depends largely on its ability to favor regular uninformed investors. One implication is that the hybrid book building/open offer method, which is becoming increasingly popular internationally, will lead to higher underpricing than straight book building.

Building the IPO Order Book: Underpricing and Participation Limits With Costly Information

This paper examines the book building mechanism for marketing initial public offerings. We present a model where the underwriter selects a group of investors along with a pricing and allocation mechanism in a way that maximizes the information generated during the process of going public at a minimum cost. Unlike previous models, we take into account the moral hazard problem that is faced by investors when evaluation is costly. Our results suggest that for firms with the most to gain from accurate pricing, the number of investors participating in the offering is larger, and underpricing will be greater. When the demand for accuracy is relatively low, the expected amount of underpricing exactly offsets the investors' costs of acquiring information. However, when the demand for accuracy is high, the expected amount of underpricing can exceed the cost of information and investors can earn rents.

What Drives the Initial Market Performance of Italian IPOs? An Empirical Investigation on Underpricing and Price Support

The pricing of Initial Public Offerings (IPOs) in the short-run has been analyzed by several theoretical and empirical studies referring to the major international stock markets; recently this topic has been particularly popular in Europe due to the high-tech and Internet stock IPOs euphoria (partially flopped in 2000) and to the increasing number of firms going public as well. This paper presents an empirical study conducted on a unique survey of 164 IPOs on the Milan Stock Exchange between January 1985 and August 2000. In particular we aim at determining the driving forces of IPOs initial and short-run market performance. First, we analyze the first-day abnormal return. We find a significantly positive underpricing, equal to 23.94%; nonetheless, 25% of IPOs in our sample are initially overpriced. Second, we separately consider fixed-price IPOs (basically between 1985 and 1994) and IPOs with book building (mostly between 1995 and 1999): we find significantly different levels of underpricing (28.33% vs. 8.12%), and an informative role of revisions in the filed price range, this supporting the “information gathering” and “partial adjustment” theories. Thus we stress the importance of choosing adequate IPO placing strategies in order to reduce information asymmetries between the market and the investors. Third, we try to point out proxies of information asymmetries influencing the initial underpricing. For fixed-price IPOs we find a negative correlation between the underpricing and the age and systematic risk of the firm, and a positive correlation between the underpricing and the market index momentum and volatility. Coherently with the findings above, with book building the correlation with the market sentiment still remains, but the age of the firm is no more significantly correlated; all information collected by the offering parties are endogenized in the revision of the file price range, which is informative for investors. Therefore, we contend that book building allows investors to gather information at a lower cost: they obtain public information by looking at the market momentum and may extract private information from the revision of the prospectus price range as to require a lower underpricing. Finally, we look at the IPOs performance and trading volume in the first weeks of listing. We find that the initial returns contain almost all the underpricing. While the buy-and-hold performance of hot IPOs does not sensibly change after the listing, we highlight that cold IPOs move to negative returns, this suggesting temporary price support activity by underwriters. We verify that underwriters manage over-allotment and green shoe options and buy IPOs shares in the after-market in order to avoid negative initial returns. J.E.L Classification codes: G30, G32.

Why Do (or Did?) Internet-Stock IPOs Leave So Much 'Money on the Table'?

The economy advent and the Euro's arrival have given energy to EU stock markets. Even though late with respect to the US and the UK, the number of firms going public on these has considerably increased, even as a consequence of the birth of new pan-European second markets. Most IPOs resulted in huge short-run returns, compared to the offer price. The initial underpricing has been particularly manifest for firms whose products and service pertain to high-tech sectors, and distinctively to the Internet world. Yet, a substantial correction in stock prices has occurred in 2000 driven by investors' concerns about Internet companies' cash flow deficits. Many firms have been induced to delay their offerings, and the offer prices were revised downward either by the issuers or by the market with mortifying initial returns. In this paper we analyze a survey of Internet stock IPOs, listed on the Euro's secondary Stock Exchanges. The sample is made up by 86 IPOs, listed on the EASDAQ and EURO-NM from 1/1/1999 to 1/5/2000. We find an initial average return equal to 76.43%, i.e. the first-day offer price is much higher than the offer price. More than 4.6 billion euro were on the table by the IPOs issuers (54.3 million euro on the average). We aim at investigating why Internet-stock IPOs leave (or just left ?) so much money on the table. We find that the initial underpricing is strongly related to the information gathered during book building activity in the pre-selling period, which drives the revision of the prospectus price range and signals the IPO quality to uninformed investors. In fact, when the offer price is equal to the maximum price in the ex-ante file range the mean underpricing is equal to 93.71% while it is negative when the offer price is equal to the minimum price. By focusing on Italian Internet companies IPOs we also verify that IPOs underpricing does not annoy the issuers, since they discover to be much wealthier than expected, coherently with the prospect theory by Loughran and Ritter (2000). Finally we find that the initial return is driven by a number of determinants: it is positively related to the market momentum but negatively related to the density of IPOs in the same national market during the 30 days before the offering, consistently with the hot issue markets theory. Interestingly, accounting data from the prospectus about sales and profits seem to force the initial underpricing, too. The dilution of insiders' ownership is not recognized as a significant determinant. We argue that the remarkably high initial return of Internet stock IPOs in Euro-land is related to Internet euphoria, but also to the limits of traditional evaluation methods adopted by intermediates in determining the offer price. J.E.L Classification codes: G30, G32.

Share issue privatizations as financial means to political and economic ends

This study examines how political and economic factors affect the offer price, share allocation, and other terms governments choose when they privatize state-owned enterprises via a public share offering. Using a 59 country sample of 630 share issue privatizations (SIPs) with total proceeds of over $446 billion during the period 1977–1997, we find that governments consistently underprice SIP offers, tilt their share allocation patterns to favour domestic investors, impose control restrictions on privatized firms, and typically use fixed-price offers rather than book building or competitive tender offers, all to further political and economic policy objectives.

Prime e.c. commutative rings in characteristic n ≥ 2

Let CR denote the first-order theory of commutative rings with unity, formulated in the language L = 〈 +, •, 0, 1〉. Virtually everything that is known about existentially complete (e.c.) models of CR is contained in Cherlin's paper [2], where it is shown, in particular, that the e.c. models are not first-order axiomatizable. The purpose of this note is to show that, in analogy with the case of fields, there exists a unique prime e.c. model of CR in each characteristic n > 2. As a consequence we settle Problem 8 in the list of open questions at the end of Hodges' book Building models by games ([5], p. 278).By a “prime” e.c. model of characteristic n ≥ 2 we mean one that embeds in every e.c. model of characteristic n. (The embedding is not always elementary, since [2] not all e.c. models of characteristic n are elementarily equivalent.) The prime model is characterized by the fact that it is the union of a chain of finite subrings each of which is an amalgamation base for CR. In §1 we describe the finite amalgamation bases for CR and show that every finite model embeds in a finite amalgamation base; in §2 we use this information to obtain prime e.c. models and answer Hodges' question.Our results on prime e.c. models were obtained some years ago, during the fall term of 1982, while the author was a visitor at Wesleyan University. The author wishes to take this opportunity to thank the mathematics department at Wesleyan for its hospitality during that visit, and subsequent ones.

Building America: The democratic promise of public work, by Harry C. Boyte and Nancy N. Kari. Philadelphia: Temple University Press,1996. 255 pp., $18.95

National Civic ReviewVolume 86, Issue 1 p. 93-95 Book Building America: The democratic promise of public work, by Harry C. Boyte and Nancy N. Kari. Philadelphia: Temple University Press,1996. 255 pp., $18.95 Michael McGrath, Michael McGrath Michael McGrath is director of press and communications at the National Civic League and editor of the National Civic Review.Search for more papers by this author Michael McGrath, Michael McGrath Michael McGrath is director of press and communications at the National Civic League and editor of the National Civic Review.Search for more papers by this author First published: 01 February 2007 https://doi.org/10.1002/ncr.4100860113 AboutPDF ToolsExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat No abstract is available for this article. Volume86, Issue1Spring 1997Pages 93-95 RelatedInformation