The Role of Institutional Investors in Corporate Finance
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.
Volume (Year): XLIX (2004)
Issue (Month): 4 ()
|Contact details of provider:|| Postal: Naamsestraat 69, 3000 Leuven|
Web page: http://feb.kuleuven.be/rebel
More information through EDIRC
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)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.