Institutional investors and firm performance: Evidence from IPOs |
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| Institution: | 1. Questrom School of Business, Boston University, United States;2. Coller School of Management, Tel Aviv University, Israel;1. Patrick E. Molony Professor, Department of Economics, Auburn University, 138 Miller Hall, Auburn, AL 36849, United States;2. Department of Economics, University of California Santa Cruz, 1156 High Street, Santa Cruz, CA 95064, United States;1. Korea University Business School, 145 Anam-ro, Seongbuk-gu 02841, Seoul, South Korea;2. KB Financial Group, Yeouido-dong, Yeongdeungpo-gu, Seoul, South Korea;3. Hankuk University of Foreign Studies, Imun-ro, Dongdaemun-gu, Seoul, South Korea;1. School of Economics and Management, Southeast University, Nanjing, China;2. Research Center for Financial Complexity and Risk Management, Southeast University, Nanjing, China;3. School of Finance, Yunnan University of Finance and Economics, Kunming, China |
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| Abstract: | We investigate the post-IPO evolution of institutional investor holdings and the manner in which operating performance is related to these holdings. During the first year after the IPO, average institutional holdings increase from 24% to 36% of shares outstanding and stabilize at about 42% by the end of the second year. We document that post-IPO operating performance is positively related to institutional holdings, but this relation subsides in the third year after the IPO. Overall, our findings indicate that institutional ownership is a valid indicator of the firm’s operating performance in its initial years as a public company. |
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| Keywords: | IPO Institutional investors Ownership structure Operating performance Equity issuance Agency |
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