Regulating IPOs: Evidence from going public in London, 1900-1913

This study assesses the impact of self-regulation on equity markets by analysing IPO failure rates on the London Stock Exchange during 1900-13. Focussing on differences between Official Quotation (OQ) and Special Settlement (SS) methods of going public, we find that the failure rate of IPOs by way of SS was considerably higher even after controlling for firm characteristics and for the presence of underwriters and elite directors. Furthermore, overall market-adjusted returns for SS IPOs, including the relatively few IPO “winners”, were extremely poor. Our findings have implications for the literature on self-regulation of securities markets as well as long-standing debates on British capital market development before 1914.