Underwriters’ price support regulation and institutional investors’ trading: The case of the putback option

Joon Ho Hwang, Joohwan Kim and Jinwoo Park

Research in International Business and Finance, 2021, vol. 57, issue C

Abstract: We examine a period in Korea during which a price supporting regulation called the putback option was imposed on the IPO underwriter. Under the regulation, individual investors of IPO had put options which can be exercised at 90% of IPO price. We find that during the regulation period, institutional investors’ flipping activity is evident not on the days following the IPO but on the days following the expiration of putback option. Our study shows that the regulation results in merely delaying the institutional investors’ documented trading behavior and provides evidence that the relationship between the underwriter and the institutional investors affects the trading of institutional investors.

Keywords: IPO; Underwriter; Regulation; Institutional investors (search for similar items in EconPapers)
JEL-codes: G15 G18 G23 G24 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:57:y:2021:i:c:s0275531921000222

DOI: 10.1016/j.ribaf.2021.101401

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