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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.

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.

Suggested Citation

  • Arthurs, Jonathan D. & Busenitz, Lowell W. & Hoskisson, Robert E. & Johnson, Richard A., 2009. "Signaling and initial public offerings: The use and impact of the lockup period," Journal of Business Venturing, Elsevier, vol. 24(4), pages 360-372, July.
    • Handle: RePEc:eee:jbvent:v:24:y:2009:i:4:p:360-372
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    References listed on IDEAS

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