Abstract

Under the bookbuilding procedure, the investment banker asks institutional investors how many shares they would like to buy and the maximum price they are willing to pay. After collecting the information, the investment banker uses it to price the issue and to allocate shares among the investors. We examine the books from 39 international issues. For each issue we look at the bids and the corresponding allocation. We infer some of the criteria the investment banker uses in order to allocate shares. Our results have implications for the various theories related to the underpricing of initial public o#erings. Address for correspondence: London Business School, Institute of Finance and Accounting, Sussex Place, Regent's Park, London NW1 4SA, UK. Email: Fcornelli @lbs.ac.uk and Dgoldreich@lbs.ac.uk. # We are grateful to Julian Franks for insightful comments and to seminar participants at the London Business School and Wharton. We also thanks Sebastian de Ramon for excellent research assistance. Part of this researchwas done while F. Cornelli was visiting the Wharton School, whose generous hospitality is gratefully acknowledged. The project was supported by an LBS Research Fellowship Grant. 1.

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