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On the Origin of IPO Profits

Author

Listed:
  • Sergey Kovbasyuk

    (New Economic School)

  • David C. Brown

    (University of Arizona)

  • Tamara Nefedova

    (Universit Ì e Paris Dauphine-PSL)

Abstract

By combining investors' portfolio holdings with trading and commissions data, we analyze the determinants of IPO allocations. We distinguish among common explanations for investors' IPO profits: information revelation, quid pro quo arrangements (related to commissions), and post-IPO trading behaviors. We find that information proxies explain the majority of the variation in IPO profits, while commissions and post-IPO trading behaviors explain relatively little. Commissions and post-IPO trading matter at the extensive, but not intensive, margins, while information matters at both. Different explanations matter for allocations and IPO profits to Investment Managers, Hedge Funds, and Banks, Pension Funds and Insurers.

Suggested Citation

  • Sergey Kovbasyuk & David C. Brown & Tamara Nefedova, 2021. "On the Origin of IPO Profits," Working Papers w0283, New Economic School (NES).
    • Handle: RePEc:abo:neswpt:w0283
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    File URL: https://www.nes.ru/files/Preprints-resh/WP283.pdf
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    Keywords

    IPOs; Allocations; Institutional Investors; Underwriters; Money Left on the Table;
    All these keywords.

    JEL classification:

    • 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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