Do Institutions Receive Favorable Allocations in Ipos With Better Long Run Returns?

Posted: 29 Aug 2005

See all articles by Beatrice Boehmer

Beatrice Boehmer

affiliation not provided to SSRN

Ekkehart Boehmer

Singapore Management University - Lee Kong Chian School of Business

Raymond P.H. Fishe

University of Richmond - E. Claiborne Robins School of Business

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Abstract

We analyze allocations to institutional and retail investors in 441 initial public offerings (IPOs). In addition to the well known favorable first-day returns, we show that institutions also obtain more allocations in IPOs with better long-term performance. We find that initial institutional flips help predict future returns, suggesting that at least some institutions retain valuable private information about IPO firms. Collectively, these findings illustrate the importance of aftermarket relationships between underwriters and investors and that underwriters have discretionary means to compensate IPO investors beyond first-day returns and price stabilization.

Keywords: Initial Public Offerings, IPO allocations, Flipping, IPO underpricing

JEL Classification: G12, G24

Suggested Citation

Boehmer, Beatrice and Boehmer, Ekkehart and Fishe, Raymond P.H., Do Institutions Receive Favorable Allocations in Ipos With Better Long Run Returns?. Journal of Financial and Quantitative Analysis, Vol. 41, pp. 809-828, 2006, Available at SSRN: https://ssrn.com/abstract=742066

Beatrice Boehmer

affiliation not provided to SSRN

Ekkehart Boehmer (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

Singapore

Raymond P.H. Fishe

University of Richmond - E. Claiborne Robins School of Business ( email )

1 Gateway Road
Richmond, VA 23173
United States
804-289-8549 (Phone)

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