The Role of Institutional Investors in Initial Public Offerings

被引:108
作者
Chemmanur, Thomas J. [1 ]
Hu, Gang [2 ]
Huang, Jiekun [3 ]
机构
[1] Boston Coll, Carroll Sch Management, Chestnut Hill, MA 02467 USA
[2] Babson Coll, Babson Pk, MA 02157 USA
[3] Natl Univ Singapore, Sch Business, Singapore, Singapore
关键词
G32; G14; G24; LONG-RUN PERFORMANCE; UNDERWRITER REPUTATION; STRATEGIC ALLOCATION; EMPIRICAL-EVIDENCE; IPOS; INVESTMENT; RETURNS; ISSUES;
D O I
10.1093/rfs/hhq109
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
In this article, we use a large sample of transaction-level institutional trading data to analyze the role of institutional investors in initial public offerings (IPOs). The theoretical literature on IPOs has long argued that institutional investors possess private information about IPOs and that underpricing is a mechanism for compensating them to reveal this private information. We study whether institutions indeed have private information about IPOs, retain their information advantage in post-IPO trading, and are able to realize significant profits from their participation in IPOs. We also study institutional IPO allocations and allocation sales to analyze whether institutions play an important role in supporting IPOs in the aftermarket and are rewarded by underwriters for playing such a role. We find that institutions sell 70.2% of their IPO allocations in the first year, fully realize the "money left on the table," and do not dissipate these profits in post-IPO trading. Further, institutions hold allocations in IPOs with weaker post-issue demand for a longer period, and they are rewarded for this by underwriters with more IPO allocations. Finally, institutional trading has predictive power for long-run IPO performance, especially in IPOs in which they received allocations; however, this predictive power decays over time. Overall, our results suggest that institutional investors possess significant private information about IPOs, play an important supportive role in the IPO aftermarket, and receive considerable compensation for their participation in IPOs.
引用
收藏
页码:4496 / 4540
页数:45
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