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Which Trades of Institutional Investors are More Informed in the Post-IPO Market? Evidence from China

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  • Jingbin He
  • Jingchi Liao
  • Xinru Ma
  • Fei Wu

Abstract

Using comprehensive transaction-level data from China, we document that institutional investors that have participated into the IPO pricing process trade at more profitable prices in the post-IPO market than other institutional investors do, resulting in higher profitability. The outperformance is more pronounced for firms with higher information asymmetry. We also document that participating institutions are able to identify more good trading opportunities ahead of others and that this ability become stronger when trading firms with higher information asymmetry. The outperformance and trading ability of participating institutions alleviates in periods before the expiration of lock-up and when retail sentiment is higher. Overall, our results imply that participating institutions possess information advantages over other institutions in post-IPO trading.

Suggested Citation

  • Jingbin He & Jingchi Liao & Xinru Ma & Fei Wu, 2022. "Which Trades of Institutional Investors are More Informed in the Post-IPO Market? Evidence from China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(9), pages 2438-2452, July.
    • Handle: RePEc:mes:emfitr:v:58:y:2022:i:9:p:2438-2452
    DOI: 10.1080/1540496X.2021.1991787
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    Cited by:

    1. He, Jingbin & Ma, Xinru, 2023. "Is corporate social responsibility engagement influenced by nearby firms? Evidence from China," International Review of Financial Analysis, Elsevier, vol. 86(C).

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