Business Relationship and Allocation of Initial Public Offering in Korea: Abnormal Return in IPO Holding Period

Chung, Jai Woong

doi:2019.48.3.297

Korean J Financ Stud > Volume 48(3); 2019 > Article

Korean Journal of Financial Studies 2019;48(3):297-324.
DOI: https://doi.org/10.26845/KJFS.2019.06.48.3.297 Published online June 30, 2019.

Business Relationship and Allocation of Initial Public Offering in Korea: Abnormal Return in IPO Holding Period

Jai Woong Chung

거래관계가 보유기간 동안의 초과수익률을 고려한 최초공모주 배정에 미치는 영향

정재웅

고려대학교

Abstract

This paper examines how the business relationships between underwriters and institutional investors affect the abnormal returns for holding periods of IPOs. By using the monthly mutual fund holding information data and IPOs listed in KOSDAQ during 2003~2012, I find that all mutual funds, regardless of having prior business relationships in IPO with underwriters or not, sell over 92% of their IPOs within 6 months from the first day of IPO. On the basis of these results, I measure the CAR (Cumulated Abnormal Rerurn) and BHAR (Buy and Hold Abnormal Rerurn) of IPOs for 1 month, 2 months, 3 months, and 6 months and research how the business relationships between underwriters and institutional investors affect the abnormal returns for holding periods of IPOs. By univariate and multivariate analyses, I show that, on average, institutional investors with prior business relationships obtain allocations in IPOs with less holding period abnormal returns but better holding period abnormal returns especially when they receive less underpriced IPOs or more IPOs than institutional investors without prior business relationships.

Key Words: 주식배정,기관투자자,거래관계,보유기간,초과수익률,Allocation,Institutional Investor,Business Relation,Holding-Period,Abnormal Return