2016年-FCA英国金融行为监管局_occasional_paper_15_81页_2mb

Quid pro quo? What factors influence IPO allocations to investors?

Purpose

This paper investigates the factors influencing the allocation of shares in initial public offerings (IPOs) in the UK, with a focus on whether investment banks prioritize their high-revenue clients or those who provide valuable information for pricing. It also examines the role of long-term investors and liquidity providers in the allocation process.

Key Findings

Determinants of IPO Allocation

• Investor Revenues: Investment banks tend to allocate more shares to investors who generate higher revenues from other services, particularly through brokerage commissions. The top quartile of investors by revenue receive allocations approximately 60% higher than those who do not generate revenue with the bank.
• Price-Sensitive Bids: Investors who submit price-sensitive bids (rather than fixed-price bids) are more likely to receive preferential allocations. This effect is more pronounced in IPOs with corporate finance advisers.
• Meeting Participation: Investors who attend meetings with the issuer during the book-building process are favored in allocations, indicating the importance of information flow.
• Bid Size: Larger bids consistently receive higher proportionate allocations.
• Hedge Funds vs. Long-Only Investors: Long-only investors receive more favorable allocations than hedge funds, despite the latter often being perceived as liquidity providers.

Secondary Market Trading

• Flipping Activity: There is no evidence that investors who sell shares quickly after the IPO are penalized. In fact, those who flip within the first week receive slightly higher allocations.
• Liquidity Provision: High turnover in the first days of trading suggests that liquidity is not a significant factor in allocation decisions. No evidence is found that book-runners favor liquidity providers in the long-term.

Allocation Practices and Conflicts of Interest

• Conflicts of Interest: Book-runners may have a conflict of interest between issuers and investors, as revenues from investors significantly exceed those from issuers.
• Quid Pro Quo: The paper finds evidence consistent with quid pro quo arrangements, where book-runners may reward investors for providing useful information or for being long-term clients.
• Regulatory Context: The FCA has mandated that banks implement internal allocation policies to manage conflicts of interest, but the study suggests these policies may not fully prevent biased allocations.

Conclusion

The study reveals that IPO allocations are influenced by both revenue generation and information provision from investors. While the FCA has attempted to increase transparency and regulate allocation practices, the findings suggest that investment banks may still favor their high-revenue clients and those who provide valuable information. This raises concerns about the potential for conflicts of interest and the impact on IPO pricing and market efficiency.

Main Research Contributions

1. Comprehensive Dataset: The paper uses a detailed dataset covering 220 IPOs from 19 banks in the UK between January 2010 and May 2015, including book-building data, investor revenues, and post-IPO trading behavior.
2. Econometric Analysis: The authors employ an econometric approach to analyze the determinants of IPO allocations, including bank-by-bank regressions and robustness tests.
3. Comparison Across Banks: The study compares allocation practices across different investment banks, revealing heterogeneity in how they respond to investor characteristics.
4. Post-IPO Behavior Analysis: The paper investigates the relationship between allocation and subsequent investor behavior, such as flipping and liquidity provision, to assess whether these factors influence the allocation process.

Methodology

• Data Sources: The FCA provided data on IPOs, including allocation books, investor revenues, and trading behavior.
• Variables Analyzed: The study considers bid characteristics (price-limited, early submission, revision), meeting participation, investor types (hedge funds, long-only), and revenue generation.
• Regression Models: Econometric models are used to assess the impact of these variables on allocation outcomes, with results showing a significant relationship between investor revenue and allocation size, especially in hot IPOs.

Implications

The findings highlight the complexity of IPO allocation and the potential for conflicts of interest. While the FCA has sought to improve transparency and fairness, the evidence suggests that investment banks may still be influenced by their economic relationships with investors, which could affect the fairness of the IPO process and the efficiency of capital markets.