Retail and Institutional Allocation in Swedish IPOs

Sammanfattning: The purpose of this study is to test if there is discriminatory behaviour in the allocation decision in Swedish IPOs. By using a unique data set provided to us by two investment banks containing almost half of all IPOs during the chosen time period, we tested the share allocation between institutional and retail investors. The quantitative part has closely followed prior research methods presented in Hanley and Wilhlem (1995).To supplement our study, we conducted interviews with two investment bankers in order to get an inside view how they reason when allocating the shares. Contradicting previous studies made in the US market, we did not find any evidence of discriminatory behaviour towards retail investors when the IPO is more underpriced. However, we found that in the long run the overall allocation spread will indeed benefit the institutional investors.