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Does the removal of the IPO lockup matter in IPO pricing?


  • Gao, Shenghao
  • Liu, Jinzhao
  • Chan, Kam C.


Using a regulatory change on the IPO lockup for institutional investors and a unique disclosure of institutional investor bidding information in China, we examine the impact of IPO lockup removal on IPO pricing. We document that the IPO lockup removal increases institutional investor bid price. The effect is stronger for sub-samples with less reputable underwriter and IPOs with high value uncertainty. The impact is channeled to a higher IPO offer price and a lower first day return. These results suggest that IPO lockup removal (IPO lockup) increases (decreases) IPO share valuation.

Suggested Citation

  • Gao, Shenghao & Liu, Jinzhao & Chan, Kam C., 2017. "Does the removal of the IPO lockup matter in IPO pricing?," Finance Research Letters, Elsevier, vol. 23(C), pages 246-252.
  • Handle: RePEc:eee:finlet:v:23:y:2017:i:c:p:246-252
    DOI: 10.1016/

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    References listed on IDEAS

    1. Laura Casares Field, 2001. "The Expiration of IPO Share Lockups," Journal of Finance, American Finance Association, vol. 56(2), pages 471-500, April.
    2. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
    3. Brau, James C. & Lambson, Val E. & McQueen, Grant, 2005. "Lockups Revisited," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 40(03), pages 519-530, September.
    4. Gao, Shenghao & Meng, Qingbin & Chan, Kam C., 2016. "IPO pricing: Do institutional and retail investor sentiments differ?," Economics Letters, Elsevier, vol. 148(C), pages 115-117.
    5. Spatt, Chester & Srivastava, Sanjay, 1991. "Preplay Communication, Participation Restrictions, and Efficiency in Initial Public Offerings," Review of Financial Studies, Society for Financial Studies, vol. 4(4), pages 709-726.
    6. Alon Brav & Paul A. Gompers, 2003. "The Role of Lockups in Initial Public Offerings," Review of Financial Studies, Society for Financial Studies, vol. 16(1), pages 1-29.
    7. Benveniste, Lawrence M. & Spindt, Paul A., 1989. "How investment bankers determine the offer price and allocation of new issues," Journal of Financial Economics, Elsevier, vol. 24(2), pages 343-361.
    8. Francesca Cornelli & David Goldreich, 2003. "Bookbuilding: How Informative Is the Order Book?," Journal of Finance, American Finance Association, vol. 58(4), pages 1415-1443, August.
    9. repec:eee:empfin:v:42:y:2017:i:c:p:90-108 is not listed on IDEAS
    10. Chua, Ansley & Nasser, Tareque, 2016. "Insider sales in IPOs: Consequences of liquidity needs," Journal of Corporate Finance, Elsevier, vol. 39(C), pages 1-17.
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    1. repec:eee:finmar:v:38:y:2018:i:c:p:124-140 is not listed on IDEAS

    More about this item


    IPO lockup; IPO pricing; Auction; China;

    JEL classification:

    • G0 - Financial Economics - - General


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