{"title":"The role of anchor investors in initial public offerings","authors":"Ankit Singhal, Shalu Kalra, S. R. Vishwanatha","doi":"10.1111/irfi.70040","DOIUrl":null,"url":null,"abstract":"<p>Do capital market regulations improve the efficiency of allocation of capital to IPO firms? We answer this question by examining a regulation in India that allows IPO firms to seek investment from lead (anchor) institutional investors. Using a sample of 158 anchor investor-backed IPOs and 689 non-anchor IPOs from 2006 to 2020, we find that anchor-backed IPO firms are more profitable and sell at higher valuations. These IPOs raise more equity than non-anchor firms, and anchor-backed firms with higher productivity of capital raise more equity than other firms. We find that anchor-backed IPOs experience a significant improvement in profitability and Q over 4 years after the IPO. Anchor backing is associated with a lower probability of the stock being downgraded to lower categories of listing and less illiquidity. Our results suggest that capital market regulations can be effective in directing capital to firms with higher investment efficiency.</p>","PeriodicalId":46664,"journal":{"name":"International Review of Finance","volume":"25 3","pages":""},"PeriodicalIF":2.6000,"publicationDate":"2025-09-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Review of Finance","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/irfi.70040","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
Do capital market regulations improve the efficiency of allocation of capital to IPO firms? We answer this question by examining a regulation in India that allows IPO firms to seek investment from lead (anchor) institutional investors. Using a sample of 158 anchor investor-backed IPOs and 689 non-anchor IPOs from 2006 to 2020, we find that anchor-backed IPO firms are more profitable and sell at higher valuations. These IPOs raise more equity than non-anchor firms, and anchor-backed firms with higher productivity of capital raise more equity than other firms. We find that anchor-backed IPOs experience a significant improvement in profitability and Q over 4 years after the IPO. Anchor backing is associated with a lower probability of the stock being downgraded to lower categories of listing and less illiquidity. Our results suggest that capital market regulations can be effective in directing capital to firms with higher investment efficiency.
期刊介绍：
The International Review of Finance (IRF) publishes high-quality research on all aspects of financial economics, including traditional areas such as asset pricing, corporate finance, market microstructure, financial intermediation and regulation, financial econometrics, financial engineering and risk management, as well as new areas such as markets and institutions of emerging market economies, especially those in the Asia-Pacific region. In addition, the Letters Section in IRF is a premium outlet of letter-length research in all fields of finance. The length of the articles in the Letters Section is limited to a maximum of eight journal pages.
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