earticle

영어

This paper studies how the business relationship between IPO underwriters and institutional investors affects institutional investors’ holding period of IPO stocks allocated by underwriters. Prior studies such as Reuter(2006), Binay, Gatchev, and Prinsky(2007), and Chung and Kim(2015) have shown that the business relationship between underwriters and institutional investors affects underwriters’ initial allocation of IPO stocks. Chemmanur, Hu, and Huang(2010) also argues that institutional investors tend to hold longer especially for weaker post-issue demand IPOs, helping underwriters’ price stabilizing effort in the after-market and in return, underwriters allocate more IPO stocks to them. On the other hand, it is well known that on average, institutional investors sell the initially allocated IPO stocks quite quickly after their listing in the market. For example, Aggarwal(2003) and Boehmer, Boehmer, and Fishe(2006) report that in the U.S. market, flipping, selling initially allocated IPO stocks within a couple of days after their listing, is common and it is mostly conducted by institutional investors. Analyzing 142 Korean IPOs listed from Jan. 2008 to Sept. 2010, Financial Supervisory Service in Korea reports that on average, 64.7% of IPO shares were allocated to institutional investors and they sold 34.2% of them during the first trading day and 48% of them during the first 4 weeks after the listing. In addition, Dongyang Securities, examining 119 Korean IPOs from Jan. 2010 to Jun. 2011, reports that the return on IPO stocks falls rapidly after their listing, and the average closing price of those IPO stocks in one year falls to only 77% of their closing prices on the first trading day. They blamed the institutional investors’ flipping of IPO stocks for the rapid price drop. Therefore, it is evident that how long institutional investors hold the initially allocated IPOs in the after-market is an important issue for IPO firms and underwriters who care about the price stabilization after IPOs for their reputation capital and we argue, based on the findings from the prior studies, that it can be affected by the business relationship between underwriters and institutional investors. To examine the effect of the business relationship between underwriters and institutional investors on institutional investors’ holding period of initially allocated IPOs, we use monthly mutual fund holding information and IPOs listed in KOSDAQ market during 2002-2012. To our best knowledge, this is the first study that examines the holding period of IPO stocks by institutional investors in Korea. Following Chung and Kim(2015), we measure the strength of prior business relationship in three ways, (1) the total investment amount by each mutual fund in IPOs underwritten by each underwriter, (2) the number of participation by each mutual fund in IPOs underwritten by each underwriter, and (3) the average investment amount by each mutual fund in each IPO underwritten by an underwriter, based on prior one and two years of IPO participation information by each mutual fund. We find that mutual funds sell on average, about 48% of IPO stocks within 30 calendar days after the listing. Funds who have prior 1(2) year(s) business relationship with the underwriter, however, hold the IPO stocks on average, about 22.67(17.12) calendar days longer than without the relationship. We also show that the strength of the relationship matters: the stronger the relationship is, the longer the funds hold IPO stocks. Tobit analyses confirm the result shown by Aggarwal(2003) that institutional investors tend to sell more quickly with more underpriced IPOs(hot IPOs). We, however, show that when institutional investors have the stronger business relationship with underwriters, they seem to hold hot IPOs longer than those with the relatively weaker relationship. Combining the results from Chung and Kim(2015), these results imply that underwriters with the business relationship with institutional investors allocate more favorable IPO stocks, and in return, institutional investors hold them longer, helping the underwriters stabilize price in the after IPO market. In addition, we show that funds tend to hold IPO stocks longer on average, after June of 2007 when the mandatory price stabilization regulation was removed from Korean market. Interestingly, we find that funds who are affiliated with underwriters hold IPO stocks shorter than unaffiliated funds. We also find that the business relationship has negative effect on holding period by affiliated funds.

한국어

본 연구는 IPO 주간사와 기관투자자들 간의 과거 거래관계가 기관투자자들이 초기 배정받은 IPO 주식을 보유하는 기간에 미치는 영향을 살펴보았다. 2002년-2012년 기 간 국내 코스닥(KOSDAQ)시장에 상장한 IPO와 공모주 펀드의 월간 주식 보유 자료를 이용한 분석 결과에 따르면, 과거 거래관계정도가 강했던 펀드일수록 주간사로부터 배정받은 IPO 주식을 더 오래 보유하는 것으로 나타났다. 이러한 경향은 특히 hot IPO 주식(혹은 저평가된 IPO 주식)의 경우 더 강하게 나타나, 특정 주간사와 과거 거 래관계를 가지고 있는 기관투자자가 상장 후 IPO 주식에 대한 주간사의 가격지지 노 력을 도와주는 것으로 보여 진다. 한편, 국내 IPO시장에서 시장조성제도가 폐지된 2007년 6월 이후, 주간사와 거래관계가 있었던 기관투자자들이 IPO 초기배정물량을 더 오래 보유하는 것으로 확인되었다. 주간사와 펀드가 동일 금융 계열사인 경우 펀 드는 배정받은 IPO 주식을 오히려 상대적으로 더 단기간 보유하는 것으로 나타났다,