The small IPO and the investing preferences of mutual funds

Robert P. Bartlett, Paul Rose and Steven Davidoff Solomon

Journal of Corporate Finance, 2017, vol. 47, issue C, 151-173

Abstract: We examine how liquidity and return concerns at large mutual funds explain their diminished participation in small IPOs since the late 1990s. Using 5825 IPOs and portfolio-level information for 37,052 funds, we exploit Russia's 1998 debt default as an exogenous shock to funds' liquidity concerns. After 1998, large funds invested in fewer small/illiquid IPOs and more large/liquid IPOs than smaller funds and received higher returns for small IPO investments. Given increased fund sizes since 1990, these results are consistent with funds' liquidity concerns and their demand for greater compensation when investing in transactions representing a trivial fraction of fund assets.

Keywords: Initial public offerings; Liquidity; Flight-to-liquidity; Mutual funds; Institutional investors (search for similar items in EconPapers)
JEL-codes: G01 G11 G12 G20 G24 G38 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:47:y:2017:i:c:p:151-173

DOI: 10.1016/j.jcorpfin.2017.08.008

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