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Signaling and initial public offerings: The use and impact of the lockup period

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  • Arthurs, Jonathan D.
  • Busenitz, Lowell W.
  • Hoskisson, Robert E.
  • Johnson, Richard A.
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    Abstract

    To reduce information asymmetries for potential investors considering investment in an IPO venture, owners can signal the firm's longer-term viability and quality in several ways. The lockup period, is one signal that can be offered. We investigated the lockup period of a sample of 640 ventures going through the IPO and find that a longer lockup period acts as a substitute signal to venture capital (VC) and prestigious underwriter backing. Furthermore, we find that ventures which have a going concern issue can reduce the amount of underpricing at the time of the IPO by accepting a longer lockup period.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Business Venturing.

    Volume (Year): 24 (2009)
    Issue (Month): 4 (July)
    Pages: 360-372

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    Handle: RePEc:eee:jbvent:v:24:y:2009:i:4:p:360-372

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    Web page: http://www.elsevier.com/locate/jbusvent

    Related research

    Keywords: Lockup period Signaling IPO Underpricing;

    References

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    Cited by:
    1. Rosenbusch, Nina & Brinckmann, Jan & Müller, Verena, 2013. "Does acquiring venture capital pay off for the funded firms? A meta-analysis on the relationship between venture capital investment and funded firm financial performance," Journal of Business Venturing, Elsevier, Elsevier, vol. 28(3), pages 335-353.
    2. Dehlen, Tobias & Zellweger, Thomas & Kammerlander, Nadine & Halter, Frank, 2014. "The role of information asymmetry in the choice of entrepreneurial exit routes," Journal of Business Venturing, Elsevier, Elsevier, vol. 29(2), pages 193-209.

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