Key Investors in IPOs

46 Pages Posted: 9 Sep 2015 Last revised: 4 Feb 2016

See all articles by David C. Brown

David C. Brown

University of Arizona - Department of Finance

Sergey Kovbasyuk

New Economic School, Moscow

Date Written: February 4, 2016


We statistically identify institutional investors who persistently hold the most underpriced US IPOs. As a group, these key investors' holdings are strongly related to IPO underpricing and offer price revisions, more so than any other variables. Key investors are better informed than other investors; their trades predict future returns and their participation more strongly relates to underpricing when they specialize in the IPO firm's industry. We find no direct evidence that key investors' participation is motivated by underwriters' earning kickbacks. However, a significant fraction of the economic benefits of underpricing accrues to non-key investors, allowing for agency-based explanations for underpricing.

Keywords: IPO Underpricing, Institutional Investors, Underwriters

JEL Classification: G23, G24, G32

Suggested Citation

Brown, David C. and Kovbasyuk, Sergey, Key Investors in IPOs (February 4, 2016). Paris December 2015 Finance Meeting EUROFIDAI - AFFI, Available at SSRN: or

David C. Brown

University of Arizona - Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States
520-626-0746 (Phone)


Sergey Kovbasyuk (Contact Author)

New Economic School, Moscow ( email )

Skolkovskoe shosse 45
Moscow, Moscow
+393484523151 (Phone)

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