Allocation to Anchor Investors, Underpricing, and the After-Market Performance of IPOs

Seth, Rama and Vishwanatha, S. R. and Prasad, Durga (2018) Allocation to Anchor Investors, Underpricing, and the After-Market Performance of IPOs. Financial Management. pp. 1-28.

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Abstract

We study bidding by anchor investors in a two-stage initial public offering (IPO) process and document a negative, causal relation between allocation to anchor investors and underpricing. We find that anchor investors are likely to invest in hard-to-place offerings characterized by valuation uncertainty. We also document a positive relation between allocation to reputed anchor investors and returns up to lock-up expiration. Our evidence provides support for information revelation and targeting specific investors’ theories of book building. Anchor-backed IPOs earn superior returns mainly due to monitoring. Who bids in an IPO seems to matter just as particular types of bids do.

Item Type:	Article
Uncontrolled Keywords:	Anchor Investors; Underpricing; Market Performance; IPOs
Subjects:	Finance
Divisions:	Finance and Strategy
Depositing User:	Mr. Muralidhara D
Date Deposited:	19 Dec 2018 07:18
Last Modified:	19 Dec 2018 07:18
URI:	http://tapmi.informaticsglobal.com/id/eprint/559

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