2004
DOI: 10.1108/03074350410768859
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Market reaction to the expiration of IPO lockup provisions

Abstract: Initial public offering (IPO) lockup agreements prevent insider sale of shares for specified periods of time (often 180 days). This study investigates share price reactions at and around the time the lockup agreements expire. Results indicate statistically significant negative abnormal returns in the event window surrounding the expiration date. The results are consistent with informational asymmetries and decreasing incentive alignment between insiders and general shareholders. In addition, multivariate analy… Show more

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Cited by 35 publications
(19 citation statements)
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References 26 publications
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“…Bradley et al (2001) find that VC-backed US IPOs are associated with significantly more negative abnormal returns at the lock-in expiry. Similar results are found by Field and Hanka (2001), Brav and Gompers (2003) and Brau et al (2004) for the US; Espenlaub et al (2003) for the UK; Bessler and Kurth (2003) for Germany; and Bertoni et al (2002) for Italy. We proceed by dividing the sample of expiries based on whether the firm was VC-backed, regardless of whether VCs were released at that particular expiry.…”
Section: Resultssupporting
confidence: 82%
See 1 more Smart Citation
“…Bradley et al (2001) find that VC-backed US IPOs are associated with significantly more negative abnormal returns at the lock-in expiry. Similar results are found by Field and Hanka (2001), Brav and Gompers (2003) and Brau et al (2004) for the US; Espenlaub et al (2003) for the UK; Bessler and Kurth (2003) for Germany; and Bertoni et al (2002) for Italy. We proceed by dividing the sample of expiries based on whether the firm was VC-backed, regardless of whether VCs were released at that particular expiry.…”
Section: Resultssupporting
confidence: 82%
“…Out of all the shares held by the old shareholders after the IPO, more than 77% are locked in. While this seems a high proportion, it is lower than the 95% found by Field and Hanka (2001) and the 93% found by Brau et al (2004) for US IPO firms. Table 8 also reports that, 56% of all the shares outstanding are locked in after the IPO.…”
Section: Lock-in Contractscontrasting
confidence: 61%
“…I use offer price as a measure of ex ante uncertainty following Beatty and Ritter (1986) and Tinic (1988) because low stock price tend to represent firms with higher uncertainty. The offer price is inverted following Brau et al. (2004).…”
Section: Empirical Results For the Choice Of Contractsmentioning
confidence: 99%
“…This paper is also related to the share price decline around the lockup expiration dates (e.g., Brau et al. (2004), Brav and Gompers (2000, 2003), Bradley et al.…”
Section: Introductionmentioning
confidence: 99%
“…Our results also have implications for public policy. Policy makers may hope that if any negative information is withheld before an IPO, it will be revealed after the IPO and before the expiration of the lockup period (Brau et al., ). Although lockup provisions are designed to reduce information uncertainty, this study indicates that the lockup provision merely extends the period during which insiders may engage in opportunistic behaviour.…”
Section: Discussionmentioning
confidence: 99%