Institutional Investors and Firm Performance: Evidence from IPOs

North American Journal of Economics and Finance, 2019

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: October 14, 2019

Abstract

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

Michel, Allen and Oded, Jacob and Shaked, Israel, Institutional Investors and Firm Performance: Evidence from IPOs (October 14, 2019). North American Journal of Economics and Finance, 2019, Available at SSRN: https://ssrn.com/abstract=3700806

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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