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PO Lock-in Agreements in the UK


Author Info

  • Susanne Espenlaub

    (University of Manchester,)

  • Marc Goergen
  • Arif Khurshed

    (University of Manchester,)


When a company offers shares in an initial public offering (IPO), existing owners often enter into lock-in agreements prohibiting them from selling shares for a specified period after the IPO. There is some recent US evidence of predictable share-price movements at the time of expiry of these lock-in agreements. Using a sample of 188 firms, 83 classified as high-tech and 105 others, that went public on the London Stock Exchange (LSE) during 1992-1998, we focus on the characteristics of lock-in agreements in the UK and on the behaviour of stocks returns around the lock-in expiry date. We find that the lock-in contracts of LSE-listed firms are much more complex, varied and diverse than US contracts, which usually standardise the lock-in period at 180 days after the IPO. We also find evidence of negative abnormal stock returns at and around lock-in expiry of similar magnitude to those reported in US studies. However, these abnormal returns are typically not statistically significant. While the deterioration in stock returns immediately around the expiry date appears to be particularly much more pronounced for high-tech stocks than for others, the differences in performance are not statistically significant. Copyright Blackwell Publishers Ltd 2001.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Business Finance & Accounting.

Volume (Year): 28 (2001-11)
Issue (Month): 9&10 ()
Pages: 1235-1278

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Handle: RePEc:bla:jbfnac:v:28:y:2001-11:i:9&10:p:1235-1278

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Cited by:
  1. Wolfgang Bessler & Andreas Kurth, 2007. "Agency Problems and the Performance of Venture-backed IPOs in Germany: Exit Strategies, Lock-up Periods, and Bank Ownership," The European Journal of Finance, Taylor & Francis Journals, vol. 13(1), pages 29-63.
  2. Goergen, Marc & Khurshed, Arif & Renneboog, Luc, 2009. "Why are the French so different from the Germans? Underpricing of IPOs on the Euro New Markets," International Review of Law and Economics, Elsevier, vol. 29(3), pages 260-271, September.
  3. Goergen, M. & Renneboog, L.D.R., 2005. "Shareholder Lock-In Contracts: Share Price and Trading Volume Effects at the Lock-In Expiry," Discussion Paper 2005-030, Tilburg University, Tilburg Law and Economic Center.
  4. Espenlaub, S. & Goergen, M. & Khurshed, A. & Renneboog, L.D.R., 2002. "Lock-In Agreements in Venture Capital Backed UK IPOs," Discussion Paper 2002-46, Tilburg University, Center for Economic Research.
  5. Goergen, M. & Renneboog, L.D.R. & Khurshed, A., 2004. "Shareholder Lockup Agreements in the European New Markets," Discussion Paper 2004-121, Tilburg University, Center for Economic Research.
  6. Beat Reber & Bob Berry & Steve Toms, 2005. "Firm resources and quality signalling: evidence from UK initial public offerings," Applied Financial Economics, Taylor & Francis Journals, vol. 15(8), pages 575-586.


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