What Determines Institutional Investors’ Holdings in IPO Firms?

International Review of Finance, Forthcoming

50 Pages Posted: 16 Nov 2020

See all articles by Allen Michel

Allen Michel

Boston University, Questrom School of Business

Jacob Oded

Tel Aviv University - Coller School of Management

Israel Shaked

Boston University - Questrom School of Business; Michel Shaked Group

Date Written: July 9, 2020

Abstract

We investigate the manner in which institutional investors' investments in IPO firms are related to IPO characteristics and pre-IPO operating performance. We find that institutions' initial holdings are strongly related to the public float (the fraction of shares floated to the public), but are unrelated to the ratio of primary-to-total shares issued. This suggests that institutions prefer IPOs that are associated with ownership structure change, and are indifferent to whether the motivation behind the IPO is fund raising or original owners' value liquidation. Moreover, initial institutional holdings are unrelated to commonly used measures of pre-IPO operating performance such as return on sales and return on assets. We also find that institutions are predisposed to invest in value firms rather than growth firms.

Keywords: agency, equity issuance, institutional investors, IPO, operating performance, ownership structure, public float

JEL Classification: G20; G30; G32

Suggested Citation

Michel, Allen and Oded, Jacob and Shaked, Israel, What Determines Institutional Investors’ Holdings in IPO Firms? (July 9, 2020). International Review of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3700789

Allen Michel

Boston University, Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States

Jacob Oded (Contact Author)

Tel Aviv University - Coller School of Management ( email )

Ramat Aviv
Tel-Aviv, 6997801
Israel

Israel Shaked

Boston University - Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States

Michel Shaked Group ( email )

2 Park Plaza #500
Boston, MA 02116
United States

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