Which Trades of Institutional Investors are More Informed in the Post-IPO Market? Evidence from China

Jingbin He, Jingchi Liao, Xinru Ma and Fei Wu

Emerging Markets Finance and Trade, 2022, vol. 58, issue 9, 2438-2452

Abstract: Using comprehensive transaction-level data from China, we document that institutional investors that have participated into the IPO pricing process trade at more profitable prices in the post-IPO market than other institutional investors do, resulting in higher profitability. The outperformance is more pronounced for firms with higher information asymmetry. We also document that participating institutions are able to identify more good trading opportunities ahead of others and that this ability become stronger when trading firms with higher information asymmetry. The outperformance and trading ability of participating institutions alleviates in periods before the expiration of lock-up and when retail sentiment is higher. Overall, our results imply that participating institutions possess information advantages over other institutions in post-IPO trading.

Date: 2022
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DOI: 10.1080/1540496X.2021.1991787

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