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

  • Arthurs, Jonathan D.
  • Busenitz, Lowell W.
  • Hoskisson, Robert E.
  • Johnson, Richard A.
Registered author(s):

    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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    File URL: http://www.sciencedirect.com/science/article/B6VDH-4SJR2D7-3/2/49a3778ef754210d97cffe93e79ec53a
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    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
    Contact details of provider: Web page: http://www.elsevier.com/locate/jbusvent

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