Efficiency of IPO Offering Techniques : Semi - theoretical Framework and Empirical Results for US and Chinese New Issues

1 The author will be working in Washington, DC beginning in June, 2006 for the economic consulting firm Bates White, LLC. Please email any comments and questions to [email protected]. Abstract The efficiency of three major initial offering techniques—book-building, fixed-price, and auctions—are compared across US and Chinese IPOs from 1999 through 2005. Efficiency is measured by first-day returns, gross proceeds, and money left on the table of new issues. A semi-theoretical framework adapts theory from Benveniste & Wilhelm (1997) and incorporates empirical figures from other studies to develop a prediction of average first-day returns for each offering technique. A lengthy data calibration was performed prior to the empirical analysis, seeking to replicate results from Welch & Ritter (2002) on first-day returns, gross proceeds, and money left on table.