Bookbuilding and Strategic Allocation


  • Francesca Cornelli,

  • David Goldreich

  • * Cornelli is at Fuqua School of Business, Duke University; London Business School; and CEPR. Goldreich is at London Business School. We are grateful to Alon Brav, Ian Cooper, Leonardo Felli, Julian Franks, Larry Glosten, Kathleen Hanley, Campbell Harvey, Ravi Jagannathan, Matti Keloharju, Alexander Ljungqvist, Ernst Maug, Roni Michaely, Clara Raposo, Barbara Rindi, Jay Ritter, Kristian Rydqvist, Henri Servaes, René Stulz (the editor), Ivo Welch, Avi Wohl, Luigi Zingales, and two anonymous referees for insightful comments and to seminar participants at Aarhus University, Cornell University, Duke University, European University Institute, HEC, INSEAD, London Business School, London School of Economics, Northwestern University, NYSE, Rutgers University, Stanford University, Tulane University, University of Chicago, University of Georgia, University of Michigan, University of North Carolina—Chapel Hill, Universitá di Salerno, University of Utah, the Wharton School, the 1999 Finance Summer Symposium in Gerzensee, the 1999 WFA meetings, and the 2000 NBER Corporate Finance Summer Institute. We also thank Sebastian de Ramon, Burcin Kasapoglu, Farshad Mashayekhi, and Lakshman Easwaran for excellent research assistance and Sandra Moore for editing the text. We give particular thanks to the investment banker who supplied us with the data. Part of this research was done while Cornelli was visiting the Wharton School, whose generous hospitality is gratefully acknowledged. The project was supported by an LBS and a CIBER Faculty Research Grant.


In the bookbuilding procedure, an investment banker solicits bids for shares from institutional investors prior to pricing an equity issue. The banker then prices the issue and allocates shares at his discretion to the investors. We examine the books for 39 international equity issues. We find that the investment banker awards more shares to bidders who provide information in their bids. Regular investors receive favorable allocations, especially when the issue is heavily oversubscribed. The investment banker also favors revised bids and domestic investors.