Impact of hedge funds on short-run IPO success

Robert Martin Hull, Sungkyu Kwak and Rosemary Walker

International Journal of Managerial Finance, 2025, vol. 21, issue 4, 1298-1316

Abstract: PurposeThis paper aims to determine if hedge fund performance is related to short-run initial public offering (IPO) success and if it is a better predictor of short-run IPO success than market performance.Design/methodology/approachThis paper utilizes the event study metric that computes monthly returns for hedge funds and Center for Research in Security Prices (CRSP) market indices. These returns are used in a regression model with dependent variables consisting of measures of short-run IPO success (SUC). We use the Vuong’s likelihood ratio test to compare the impact of hedge funds and market indices on initial public offering success.FindingsThis paper offers two new major findings. First, hedge fund performance prior to and during the IPO month (month 0) manifest a significant negative association with all measures of short-run IPO success. Second, whereas market returns also exhibit a negative association with IPO success, we show that hedge fund returns have a greater negative impact than market returns.Research limitations/implicationsThis paper does not have information on which individual hedge funds have a greater negative impact on short-run IPO success but only the hedge fund industry as a whole.Practical implicationsStronger hedge fund performance around IPOs can be detrimental to their success.Social implicationsHedge funds are a stronger force than market forces in influencing IPO success.Originality/valueThis paper is the first study to document the potential influence of hedge fund performance on the success of a security offering and to compare this performance with market performance.

Keywords: Initial public offerings; Market performance; Hedge fund performance (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/ijmf/article/21/4/1298/129 ... hort-run-IPO-success (text/html)
https://www.emerald.com/ijmf/article-pdf/21/4/1298 ... f-06-2024-0350en.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmfpp:ijmf-06-2024-0350

DOI: 10.1108/IJMF-06-2024-0350

Access Statistics for this article

International Journal of Managerial Finance is currently edited by Dr Alfred Yawson

More articles in International Journal of Managerial Finance from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().