Richard H. Pettway

Auctions versus book building of Japanese IPOs

Abstract 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.

Japanese Foreign Direct Investment: Wealth Effects From Purchases and Sales of U.S. Assets

i As the dollar has depreciated relative to many foreign currencies recently, foreign acquisitions of U.S. firms and assets have increased.1 In the 1970s and early 1980s, most foreign acquirers were from the UK, Canada, and the Netherlands. By 1987, Japanese individuals and companies owned or controlled more U.S. assets than did any other class of foreign investors.2 This paper addresses several key issues regarding Japanese direct investment in the U.S. The market for cross-