The Journal of Finance

Bids and Allocations in European IPO Bookbuilding

Published: 11/27/2005   |   DOI: 10.1111/j.1540-6261.2004.00700.x

TIM JENKINSON, HOWARD JONES

This paper uses evidence from a data set of 27 European IPOs to analyze how investors bid and the factors that influence their allocations. We also make use of a unique ranking of investor quality, associated with the likelihood of flipping the IPO. We find that investors perceived to be long‐term holders of the stock are consistently favored in allocation and in out‐turn profits. In contrast to Cornelli and Goldreich (2001), we find little evidence that more informative bids receive larger allocations or higher profits. Our results cast doubt upon the extent of information production during the bookbuilding period.

New Evidence of the Impact of Dividend Taxation and on the Identity of the Marginal Investor

Published: 12/17/2002   |   DOI: 10.1111/1540-6261.00462

Leonie Bell, Tim Jenkinson

This paper examines the impact of a major change in dividend taxation introduced in the United Kingdom in July 1997. The reform was structured in such a way that the immediate impact fell almost entirely on the largest investor class in the United Kingdom, namely pension funds. We find significant changes in the valuation of dividend income after the reform, in particular for high‐yielding companies. These results provide strong support for the hypothesis that taxation affects the valuation of companies, and that pension funds were the effective marginal investors for high‐yielding companies.

Why Don't U.S. Issuers Demand European Fees for IPOs?

Published: 11/14/2011   |   DOI: 10.1111/j.1540-6261.2011.01699.x

MARK ABRAHAMSON, TIM JENKINSON, HOWARD JONES

We compare fees charged by investment banks for conducting IPOs in the United States and Europe. In recent years, the “7% solution,” as documented by Chen and Ritter (2000), has become even more prevalent in the United States, and is now the norm for IPOs raising up to $250 million. The same banks dominate both markets, but European IPO fees are roughly three percentage points lower, are much more variable, and have been falling. We review explanations for the gap in spreads and find the evidence consistent with strategic pricing. U.S. issuers could have saved over $1 billion a year by paying European fees.

Quid Pro Quo? What Factors Influence IPO Allocations to Investors?

Published: 06/19/2018   |   DOI: 10.1111/jofi.12703

TIM JENKINSON, HOWARD JONES, FELIX SUNTHEIM

Using data from all of the leading international investment banks on 220 initial public offerings (IPOs) raising $160 billion between January 2010 and May 2015, we test the determinants of IPO allocations. We compare investors’ IPO allocations with proxies for their information production during bookbuilding and the broking (and other) revenues they generate for bookrunners. We find evidence consistent with information revelation theories. We also find strong support for the existence of a quid pro quo whereby broking revenues are a significant determinant of investors’ IPO allocations and profits. The quid pro quo remains when we control for unobserved investor characteristics and investor‐bank relationships.

Picking Winners? Investment Consultants’ Recommendations of Fund Managers

Published: 05/05/2015   |   DOI: 10.1111/jofi.12289

TIM JENKINSON, HOWARD JONES, JOSE VICENTE MARTINEZ

Investment consultants advise institutional investors on their choice of fund manager. Focusing on U.S. actively managed equity funds, we analyze the factors that drive consultants’ recommendations, what impact these recommendations have on flows, and how well the recommended funds perform. We find that investment consultants’ recommendations of funds are driven largely by soft factors, rather than the funds’ past performance, and that their recommendations have a significant effect on fund flows. However, we find no evidence that these recommendations add value, suggesting that the search for winners, encouraged and guided by investment consultants, is fruitless.

Private Equity Performance: What Do We Know?

Published: 03/27/2014   |   DOI: 10.1111/jofi.12154

ROBERT S. HARRIS, TIM JENKINSON, STEVEN N. KAPLAN

We study the performance of nearly 1,400 U.S. buyout and venture capital funds using a new data set from Burgiss. We find better buyout fund performance than previously documented—performance has consistently exceeded that of public markets. Outperformance versus the S&P 500 averages 20% to 27% over a fund's life and more than 3% annually. Venture capital funds outperformed public equities in the 1990s, but underperformed in the 2000s. Our conclusions are robust to various indices and risk controls. Performance in Cambridge Associates and Preqin is qualitatively similar to that in Burgiss, but is lower in Venture Economics.

Borrow Cheap, Buy High? The Determinants of Leverage and Pricing in Buyouts

Published: 07/26/2013   |   DOI: 10.1111/jofi.12082

ULF AXELSON, TIM JENKINSON, PER STRÖMBERG, MICHAEL S. WEISBACH

Private equity funds pay particular attention to capital structure when executing leveraged buyouts, creating an interesting setting for examining capital structure theories. Using a large, international sample of buyouts from 1980 to 2008, we find that buyout leverage is unrelated to the cross‐sectional factors, suggested by traditional capital structure theories, that drive public firm leverage. Instead, variation in economy‐wide credit conditions is the main determinant of leverage in buyouts. Higher deal leverage is associated with higher transaction prices and lower buyout fund returns, suggesting that acquirers overpay when access to credit is easier.