Showing Off in Initial Public Offerings: The Proportion of Institutional Cornerstone Investors in IPOs and the State of the IPO Market

Sammanfattning: The paper analyzes the participation of institutional cornerstone investors in initial public offerings (IPOs) using data from NASDAQ Main Market and First North Growth Market in Stockholm between 2015 and the first half of 2023. We identify positive relationships between both hot and cold IPO market periods and the proportion of institutional cornerstone investors in IPOs. The results support theories of institutional informational advantage, quid pro quo relationships between underwriters and institutions, and signaling effects. Meanwhile, we conclude that the definition of the different states of the IPO market plays a decisive role in determining the significance of the relationships.