Context-specific experience and institutional investors' performance

Neupane, Suman and Thapa, Chandra and Vithanage, Kulunu (2023) Context-specific experience and institutional investors' performance. Journal of Banking and Finance, 149. 106786. ISSN 0378-4266 (https://doi.org/10.1016/j.jbankfin.2023.106786)

[thumbnail of Neupane-Thapa-Vithanage-JBF-2023-Context-specific-experience-and-institutional]
Preview
 Text. Filename: Neupane-Thapa-Vithanage-JBF-2023-Context-specific-experience-and-institutional.pdf
Final Published Version
License: Creative Commons Attribution 4.0 logo
Download (1MB)| Preview

Abstract

We examine how context-specific experience influences the performance of institutional investors. Specifically, we explore how previous initial public offering (IPO) trading experience affects foreign institutional investors' selection, bidding, and the profitability of their future IPO investments. We find that investors who participate more frequently (i.e., those with more context-specific experience) exhibit different behaviors from those who participate less frequently. After controlling for investor fixed effects and time-varying heterogeneity, we find that only high-frequency investors improve their profitability over time by appropriately varying their subscriptions across IPOs. The effect of context-specific experience also appears to dominate other forms of general investment experience.

ORCID iDs

Neupane, Suman, Thapa, Chandra ORCID logoORCID: https://orcid.org/0000-0001-8661-8079 and Vithanage, Kulunu;
CORE (COnnecting REpositories)