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.
Original language | English |
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Journal | Financial Management |
Volume | 48 |
Issue number | 1 |
Pages (from-to) | 159-186 |
Number of pages | 28 |
ISSN | 0046-3892 |
DOIs | |
Publication status | Published - 2019 |