The Small IPO and the Investing Preferences of Mutual Funds
60 Pages Posted: 20 Jan 2016 Last revised: 7 Dec 2017
Date Written: July 28, 2017
Abstract
We examine how liquidity and return concerns at large mutual funds explain their diminished participation in small IPOs since the late 1990s. Using 5,825 IPOs and portfolio-level information for 37,052 funds, we exploit Russia’s 1998 debt default as an exogenous shock to funds’ liquidity concerns. After 1998, large funds invested in fewer small/illiquid IPOs and more large/liquid IPOs than smaller funds and received higher returns for small IPO investments. Given increased fund sizes since 1990, these results are consistent with fund’s liquidity concerns and their demand for greater compensation when investing in transactions representing a trivial fraction of fund assets.
Keywords: Initial Public Offerings, liquidity, flight-to-liquidity, mutual funds, institutional investors
JEL Classification: G01, G11, G12, G20, G24, G38
Suggested Citation: Suggested Citation
Robert P. Bartlett (Contact Author)
University of California, Berkeley - School of Law ( email )
215 Boalt Hall
Berkeley, CA 94720-7200
United States
510-642-6646 (Phone)
Paul Rose
Ohio State University - Moritz College of Law ( email )
55 West 12th Avenue
Columbus, OH 43210
United States
Steven Davidoff Solomon
University of California, Berkeley - School of Law ( email )
215 Boalt Hall
Berkeley, CA 94720-7200
United States
