Title

Do Institutions Receive Favorable Allocations in IPOs with Better Long-Run Returns?

Publication Type

Journal Article

Publication Date

12-2006

Abstract

We analyze allocations to institutional and retail investors in 441 initial public offerings (IPOs). In addition to the well-known favorable first-day returns, we show that institutions also obtain more allocations in IPOs with better long-term performance. We find that initial institutional flips help predict future returns, suggesting that at least some institutions retain valuable private information about IPO firms. Collectively, these findings illustrate the importance of aftermarket relations between underwriters and investors and that underwriters have discretionary means to compensate IPO investors beyond first-day returns and price stabilization.

Discipline

Business | Corporate Finance

Research Areas

Finance

Publication

Journal of Financial and Quantitative Analysis

Volume

41

Issue

4

First Page

809

Last Page

828

ISSN

0022-1090

Identifier

10.1017/S0022109000002659

Publisher

Cambridge University Press

Additional URL

http://dx.doi.org/10.1017/S0022109000002659