Economics at your fingertips  

Can experience mitigate precautionary bidding? Evidence from a quasi-experiment at an IPO auction

Wenjun Wang ()
Additional contact information
Wenjun Wang: Agricultural Bank of China

Journal of Asset Management, 2023, vol. 24, issue 2, No 6, 148-163

Abstract: Abstract This paper explores whether market experience exacerbates or mitigates institutional investors’ precautionary bidding behavior. Using an IPO reform in China as an exogenous shock, we apply a difference-in-difference approach to identify a causal relationship between willingness to bid and market experience. The mutual funds’ willingness to bid for the IPOs decreased by 13.53 percentage points after the removal of the three-month IPO lockup period. A one-standard-deviation increase in market experience in terms of IPO participation mitigated 4.36 percent of the decline. The mitigation effect of market experience on precautionary bidding is more pronounced for IPO firms with disadvantaged geographical locations, is attenuated for IPOs certified by reputable underwriters, and is attenuated in mutual funds that have strong business ties with the lead underwriters. Furthermore, we find investors with more market experience help to improve the efficiency of IPO pricing.

Keywords: Experience; Precautionary bidding; IPO lockup (search for similar items in EconPapers)
JEL-codes: G10 G23 L14 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link) Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:

Ordering information: This journal article can be ordered from

DOI: 10.1057/s41260-022-00286-w

Access Statistics for this article

Journal of Asset Management is currently edited by Marielle de Jong and Dan diBartolomeo

More articles in Journal of Asset Management from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2024-06-01
Handle: RePEc:pal:assmgt:v:24:y:2023:i:2:d:10.1057_s41260-022-00286-w