Institutional Allocation In Initial Public Offerings: Empirical Evidence

Reena Aggarwal, Nagpurnanand R. Prabhala and Manju Puri

No 9070, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We analyze institutional allocation in initial public offerings (IPOs) using a new dataset of US offerings between 1997 and 1998. We document a positive relationship between institutional allocation and day one IPO returns. This is partly explained by the practice of giving institutions more shares in IPOs with strong pre-market demand, consistent with book-building theories. However, institutional allocation also contains private information about first-day IPO returns not reflected in pre-market demand and other public information. Our evidence supports book-building theories of IPO underpricing, but suggests that institutional allocation in underpriced issues is in excess of that explained by book-building alone.

JEL-codes: G2 G3 (search for similar items in EconPapers)
Date: 2002-07
New Economics Papers: this item is included in nep-fin and nep-fmk
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (121)

Published as Aggarwal, R., N.R. Prabhala, and Manju Puri. “Institutional allocation in initial public offerings: Empirical evidence." Journal of Finance 57, 3 (2002): 1421-1442.

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Journal Article: Institutional Allocation in Initial Public Offerings: Empirical Evidence (2002)
Working Paper: Institutional Allocation in Initial Public Offerings: Empirical Evidence (2002)
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