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Bidding styles of institutional investors in IPO auctions

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  • Güçbilmez, Ufuk
  • Ó Briain, Tomás

Abstract

We examine the bidding behavior of institutional investors in initial public offering (IPO) auctions using a hand-collected dataset of limit bids. We find that the majority of institutional investors in our sample are “occasional bidders,” who rarely get a share allocation. “Regular bidders” are in a minority but account for the bulk of the demand. They bid conservatively, and only a few of them can be classified as “well-informed bidders,” who place more aggressive bids in hotter IPOs than in colder ones. Our findings suggest that “dirty” auctions that are restricted to institutional investors work as an information extraction mechanism.

Suggested Citation

  • Güçbilmez, Ufuk & Ó Briain, Tomás, 2021. "Bidding styles of institutional investors in IPO auctions," Journal of Financial Markets, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:finmar:v:53:y:2021:i:c:s1386418120300483
    DOI: 10.1016/j.finmar.2020.100579
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    More about this item

    Keywords

    IPO; Auction; Institutional investors; China;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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