Gentlemanly capitalism revisited: a case study of the underpricing of initial public offerings on the London Stock Exchange 1946-86

Working paper

Allegations of British capital market failure are numerous, range from claims of domestic investor bias before 1914 to charges of short-termism against institutional investors towards the end of the last century, and are frequently contentious. This paper revisits this literature by pointing up the post-1945 IPO market as a clear example of capital market failure. Despite the tender offer method delivering 10% lower underpricing than the dominant IPO method, it was adopted by fewer than 1 in 10 firms going public. This missed opportunity cost issuing firms £1.4 billion in money left on the table between 1960 and 1986 at 2004 prices and can be attributed to a lack of competition among issuing houses and brokers pre-Big Bang.

Authors: Chambers, D

• Publication status: Published
• Publisher: University of Oxford
• Series: Department of Economics Discussion Paper Series
• Publication date: 2007-12-01
• Paper number: 253
• Keywords: tender offer; IPO; British capital market failure