Aalto University - School of Business; Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)
This study examines a unique Finnish database comprising 85,384 investors and 29 IPOs. The evidence indicates that on average institutional investors do not realize larger initial returns than retail investors, as the incentive to acquire information is limited by allocation rules which favor small orders. Within each investor category, however,large orders are associated with the best performance, suggesting that information differences figure more importantly within rather than between categories. A record of successful investment performance encourages an investor to continue using the same investment bank but has no reliable effect on order size in subsequent IPOs.