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On the Origin of IPO Profits

David Brown, Sergey Kovbasyuk and Tamara Nefedova
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Tamara Nefedova: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: By combining investors' portfolio holdings with trading and commissions data, we analyze the determinants of IPO allocations. We distinguish among common explanations for investors' IPO profits: information revelation, quid pro quo arrangements (related to commissions), and post-IPO trading behaviors. We find that information proxies explain the majority of the variation in IPO profits, while commissions and post-IPO trading behaviors explain relatively little. Commissions and post-IPO trading matter at the extensive, but not intensive, margins, while information matters at both. Different explanations matter for allocations and IPO profits to Investment Managers, Hedge Funds, and Banks, Pension Funds and Insurers.

Keywords: IPOs; Allocations; Institutional Investors; Underwriters; Money Left on the Table (search for similar items in EconPapers)
Date: 2021-12
New Economics Papers: this item is included in nep-cfn
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Published in Finance Meeting EUROFIDAI – ESSEC, Dec 2021, Paris, France

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Working Paper: On the Origin of IPO Profits (2021) Downloads
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