Institutional Investor Trading and IPOs Performance

Park, Jin Woo; Jung, Gyu Chul; Cho, Jang Eun

Korean Journal of Financial Studies 2016;45(1):171-192.
Published online February 28, 2016.

Jin Woo Park, Gyu Chul Jung, Jang Eun Cho

기관투자자 거래와 IPO 이후 주가성과

박진우, 정규철, 조장은

Abstract

This paper examines the impact of institutional investor trading on the investment performance of IPO stocks listed on the Korea Exchange (KRX) during the period from 2003 to 2012. The results are summarized as follows. First, on average more than 20% of offering shares are sold by institutional investors within one month following IPOs. In particular, the net selling of institutional investors concentrates for the first few days of IPOs. Second, in the examination of quintile portfolios that are composed by the cumulative net buying ratio of institutional investors within one month following IPOs, 1-year BHAR (buy-and-hold abnormal return) of the highest portfolio (Q5) is larger than that of the lowest portfolio (Q1) by more than 7%. This result suggests that smart money effect of institutional investors exists in the Korean IPO market. Third, the cross-sectional regression result also confirms that the net buying ratio of institutional investors has a significantly positive impact on the 1-year BHAR of IPO stocks. Fourth, in the investigation of the institutional investors that are classified into eight groups including investment trust companies, securities companies, banks, insurance companies, pension funds, private equity funds, national institution, and others, we find that the results are somewhat mixed. Finally, we find that the initial returns and volatility of IPO stocks are significant determinants of the trading pattern of institutional investors.

Key Words: 기관투자자,순매수비율,신규상장,정보비대칭,투자성과,Information Asymmetry,Initial Public Offerings,Institutional Investor,Investment Performance,IPOs,Net Buying Ratio