 THE ROLES OF INSTITUTIONAL INVESTORS IN THE FAILURE OF NEWLY PUBLIC STOCKSHong Qian, Santhosh Ramalingegowda and Zhaodong Zhong Journal of Financial Research, 2019, vol. 42, issue 4, 757-788 Abstract: In this article, we study two negative events that can happen to newly public stocks: (1) the price drops at least 50% from the closing price on the first trading date within one year after the initial public offering (IPO) (initial failure) and (2) the firm is delisted for negative reasons within three years after the IPO (final failure). We find that high investor sentiment at the time of IPO can lead to both initial failure and final failure of IPO firms, whereas monitoring by external professionals plays a more important role in averting final failure than initial failure. Exploring the roles of different types of institutional investors, we find that transient (i.e., short‐term trading) institutions sell before initial failure. In contrast, dedicated (i.e., monitoring) institutions focus on long‐term performance and may stay with stocks suffering temporary initial failure, but their selling typically signals the imminent final failure of newly public firms. Date: 2019 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:jfnres:v:42:y:2019:i:4:p:757-788 Ordering information: This journal article can be ordered from Access Statistics for this article Journal of Financial Research is currently edited by Jayant Kale and Gerald Gay More articles in Journal of Financial Research from Southern Finance Association Contact information at EDIRC., Southwestern Finance Association Contact information at EDIRC. |
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