Since the burst of the internet bubble there is a great deal of interest in the way investment bank prices and allocates initial public offerings (IPOs). The additional scrutiny and spotlight is also because of the dominance of bookbuilding mechanism, which gives complete discretion in terms of allocation and pricing to underwriters, and the huge amount of money left on the table by the issuers, especially during the internet bubble period. Numerous press stories and law suit by investors and issuers alleged conflicts of interest by investment banks at the expense of issuers and investors. On the basis of scoping study we identified five areas to examine conflicts of interest: laddering, spinning, relationship banking, profit sharing allocation and allocation to affiliated funds. The findings of the systematic review show that very limited research has been done on the areas identified. Moreover, there is almost no evidence available to examine the behaviour of investment banks post internet bubble burst. Likewise, very limited evidence is available from countries other than United States. From whatever limited research has been done in these areas there does seem to be enough evidence to suggest that investment banks have been involved in activities that is in conflict with their responsibilities and duties. There is clear evidence of wrong doing by investment banks in US during the internet bubble period by being involved in spinning, laddering and profit sharing allocations. There is not much evidence available at the moment to charge the underwriters of exploiting issuers and investors through the use of affiliated banks, venture capitalists and mutual funds. There is a great need to examine the behaviour of investment banks not only for the sake of the stability of the financial markets but also for the financial intermediaries themselves as unnecessary regulations undermine the efficient operations of financial markets.
| Identifer | oai:union.ndltd.org:CRANFIELD1/oai:dspace.lib.cranfield.ac.uk:1826/12486 |
| Date | January 2008 |
| Creators | Neupane, S. |
| Contributors | Poshakwale, Sunil |
| Publisher | Cranfield University |
| Source Sets | CRANFIELD1 |
| Language | English |
| Detected Language | English |
| Type | Thesis or dissertation, Masters, MSc |
| Rights | © Cranfield University, 2008. All rights reserved. No part of this publication may be reproduced without the written permission of the copyright holder. |
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