Institutional Ownership and IPO Performance: Australian Evidence
The duo IPO anomalies of underpricing and long run underperformance have inspired a plethora of studies. Yet few have examined the impact of majority investors in IPOs, namely institutional investors. Consistent with previous studies, we found large underpricing which was greatest in those issuers with the highest initial institutional ownership. Yet these issuers experienced the worst long-run underperformance which casts doubts over the informed-trading hypothesis. The findings are consistent with overreactions driven by informational cascade in the IPO market. High level of initial institutional interests generates informational herding that drives these issuers’ prices beyond the fundamental. Over time, market correction leads to the long-run underperformance. Our results cast a somewhat different light on institutions’ role in IPOs, rather than being a valuable source of price discovery; Institutions may be a force of destabilization in what is already an event wrath with uncertainty.
|Date of creation:||01 Apr 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +61 2 9514 7777
Fax: +61 2 9514 7711
Web page: http://www.uts.edu.au/research-and-teaching/our-research/paul-woolley-centre
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:uts:pwcwps:6. 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: (Duncan Ford)
If references are entirely missing, you can add them using this form.