Institutional Investors and Firm Performance: Evidence from IPOs
North American Journal of Economics and Finance, 2019
50 Pages Posted: 16 Nov 2020
Date Written: October 14, 2019
We investigate the post-IPO evolution of institutional investor holdings and the manner in which operating performance is related to these holdings. During the first year after the IPO, average institutional holdings increase from 24% to 36% of shares outstanding and stabilize at about 42% by the end of the second year. We document that post-IPO operating performance is positively related to institutional holdings, but this relation subsides in the third year after the IPO. Overall, our findings indicate that institutional ownership is a valid indicator of the firm's operating performance in its initial years as a public company.
Keywords: IPO, institutional investors, ownership structure, operating performance, equity issuance, agency.
JEL Classification: G30, G32
Suggested Citation: Suggested Citation