We analyse a regulatory change in the Japanese IPO market that created an abrupt shift from hybrid price-discriminatory auctions to bookbuilding. We find that bookbuilding leads to significantly higher underpricing than hybrid price-discriminatory auctions. Further, we find evidence that price...

The litigation risk hypothesis of IPO underpricing posits that issuers underprice IPOs in an effort to avoid costly litigation and that underpricing should be greater for issuers with ex-ante higher levels of litigation risk. This paper reexamines this hypothesis for IPO samples in the different...