Diversity of Institutional Investors’ Bidding Opinions in Shaping the Sustainability of IPO Performance

Anqi Li, Xue Li, Jiayan Liu and Aochen Cao ()
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Anqi Li: School of Economics, Central University of Finance and Economics, Beijing 102206, China
Xue Li: School of Economics and Management, Southwest University of Science and Technology, Mianyang 621010, China
Jiayan Liu: School of Finance, Capital University of Economics and Business, Beijing 100070, China
Aochen Cao: School of Economics, Central University of Finance and Economics, Beijing 102206, China

Sustainability, 2024, vol. 16, issue 11, 1-21

Abstract: In this study, we leverage a comprehensive dataset of over 3.8 million bid entries from institutional investors participating in China’s capital market to investigate the determinants of heterogeneous bidding behavior among these investors and the subsequent economic outcomes. We evaluate the sustainability of initial public offering (IPO) performance through three interrelated metrics: post-IPO stock price performance, financial accounting performance, and environmental, social, and governance (ESG) performance. Our analysis reveals a pronounced positive association between the quality of firms’ pre-IPO and the recent reforms to the bookbuilding mechanism in China’s capital market, as well as the level of diversity in institutional investors’ bidding opinions. After accounting for these factors, we focus on the nexus between the diversity of bidding opinions and the sustainability of IPO performance. The empirical evidence indicates that a higher degree of diversity in bidding opinions is inversely related to firms’ post-IPO stock price performance, financial accounting performance, and ESG performance. Further mechanism tests suggest that this diversity leads to a depletion of medium- to long-term share price performance by intensifying market sentiment; impedes the enhancement of financial accounting performance by reducing the capital raised during the IPO; and negatively impacts ESG performance by constraining the firm’s ability to fulfill its corporate social responsibilities. These findings challenge the assumption that diversity of opinion is always beneficial. The insights gained from this research have significant implications for the sustainable growth strategies of listed companies in emerging markets.

Keywords: Chinese capital market; diversity of opinions; sustainability; ESG performance (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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