The Role of Cornerstone and Strategic Investors in IPO Survival

37 Pages Posted: 20 Aug 2015

See all articles by Susanne Espenlaub

Susanne Espenlaub

University of Manchester - Manchester Business School

Arif Khurshed

University of Manchester - Manchester Business School, Division of Accounting Finance

Abdul Mohamed

Cranfield University - School of Management

Brahim Saadouni

Alliance Manchester Business School, The University of Manchester

Date Written: August 19, 2015

Abstract

We examine the impact of the allocation of initial public offerings (IPOs) to specific investor groups on post-IPO performance in terms of how long an IPO remains listed. We focus on the Hong Kong IPO market, where detailed data on share allocation are publicly available. In this context, we assess the roles of so-called cornerstone and strategic investors in IPOs, who agree with the issuers a specified investment in the IPO and enter into lock-up periods. We find that the presence, number and lock-up periods of strategic investors, and the prevalence of foreign strategic investors, significantly increase IPO survival (delay the time to delisting). By contrast, the impact of cornerstone investors is at best marginally significant. Our results are robust to using different measures of survival.

Keywords: survival, IPO, new listings, share allocation, cornerstone investor, strategic investor, demand multiple, Hong Kong

Suggested Citation

Espenlaub, Susanne and Khurshed, Arif and Mohamed, Abdul and Saadouni, Brahim, The Role of Cornerstone and Strategic Investors in IPO Survival (August 19, 2015). Available at SSRN: https://ssrn.com/abstract=2647696 or http://dx.doi.org/10.2139/ssrn.2647696

Susanne Espenlaub

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Arif Khurshed

University of Manchester - Manchester Business School, Division of Accounting Finance ( email )

Crawford House
Oxford Road
Manchester, M15 6PB
United Kingdom
+44 0 161 275 4475 (Phone)
+44 0 161 275 4023 (Fax)

Abdul Mohamed (Contact Author)

Cranfield University - School of Management ( email )

Bedfordshire, MK43 0AL
United Kingdom

Brahim Saadouni

Alliance Manchester Business School, The University of Manchester ( email )

Crawford House
Oxford Road
Manchester M13 9PL
United Kingdom

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