IDEAS home Printed from https://ideas.repec.org/a/ete/revbec/20040406.html
   My bibliography  Save this article

The Role of Institutional Investors in Corporate Finance

Author

Listed:
  • N. Huyghebaert
  • C. Van Hulle

Abstract

This paper argues that institutional investors may have a positive effect on stock prices. This effect realizes through different mechanisms: institutional investors reduce information asymmetries between firms and (other) investors, contribute to the liquidity of the company’s stock and improve its corporate governance. We conjecture that firms, understanding the benefits of having institutional investors in their ownership, may do efforts to attract them. We apply this idea in the context of IPOs. Using data on Belgian IPOs over the period 1984-2000, we find that firms using the stock market as a financing vehicle and firms less likely to be monitored by corporate blockholders are more likely to pre-allocate shares to institutional investors at IPO-time. Finally, pre-allocating shares to institutional investors is shown to reduce underpricing and enhance post-IPO liquidity.

Suggested Citation

  • N. Huyghebaert & C. Van Hulle, 2004. "The Role of Institutional Investors in Corporate Finance," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business, Review of Business and Economic Literature, vol. 0(4), pages 689-726.
  • Handle: RePEc:ete:revbec:20040406
    as

    Download full text from publisher

    File URL: https://lirias.kuleuven.be/bitstream/123456789/85623/1/TEM_4-04_07_HUYGHEBAERT.pdf
    Download Restriction: no

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ete:revbec:20040406. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (library EBIB). General contact details of provider: http://edirc.repec.org/data/fekulbe.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.