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Role of asymmetric information and moral hazard on IPO underpricing and lockup

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  • Hoque, Hafiz

Abstract

This paper analyses the role of asymmetric information and moral hazard on IPO underpricing and lockups. I document that high information asymmetry is related to underpricing while the lockup length and lockup expiration return is related to moral hazard. Accordingly, lockup length and underpricing work as substitute signals. These results relate to the UK's unique institutional settings: long and diverse lockups, and a close relationship between the issuing company and the corporate broker. Moreover, director ownership affects lockup length and lockup expiration return in a non-linear fashion.

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  • Hoque, Hafiz, 2014. "Role of asymmetric information and moral hazard on IPO underpricing and lockup," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 30(C), pages 81-105.
    • Handle: RePEc:eee:intfin:v:30:y:2014:i:c:p:81-105
    DOI: 10.1016/j.intfin.2014.02.001
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    9. Sahil Narang & Rudra P. Pradhan, 2021. "IPO lock-up: a review and assessment," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 48(3), pages 343-369, September.
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    More about this item

    Keywords

    Information asymmetry; Moral hazard; Lockups; Underpricing; UK market;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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