In 1997, Japan introduced book building an alternative to an auction method of IPO pricing that had been required since 1989. Shortly after its authorization, all IPOs in Japan were priced by book building. The shift occurred despite economic arguments and evidence suggesting that the auction...

In contrast to prior studies suggesting that overallotment option (OAO) provisions reflect underwriters' exploitation of IPO firms, we provide evidence that they benefit both issuers and underwriters. We estimate that OAO provisions lead to lower underwriting fees, less underpricing, less...