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Impact of Lock-Up Provision on Two IPO Anomalies in the Immediate Aftermarket

Author

Listed:
  • Norliza Che-Yahya

    (Faculty of Business and Management, Universiti Teknologi MARA, Malaysia)

  • Ruzita Abdul-Rahim

    (Faculty of Economics and Management, Universiti Kebangsaan Malaysia, Malaysia)

  • Rasidah Mohd-Rashid

    (College of Business, Universiti Utara Malaysia, Malaysia)

Abstract

Lock-up provision may extend its role as a signaling tool, albeit its practice is mainly to ensure the commitment of major shareholders to the well-being of IPO companies at least during lock-up period. Despite the mandatory lock-up ratio of 45 percent of outstanding shares, the voluntary action of major shareholders which is revealed through higher locked ratios signals some information about the IPO companies, for instance quality of the issuers. The information signaled through the voluntary action elicits different investors’ trading behavior and subsequently performance of IPO in the immediate aftermarket. This paper examines the impact of lock-up provision on two IPO anomalies in the immediate aftermarket; initial return and flipping activity. Employing data of 383 Malaysian IPOs listed from January 2000 to December 2013, multiple regression analysis reveals that lock-up provision (period and ratio) influences flipping activity, more via its committing role instead of signaling role.

Suggested Citation

  • Norliza Che-Yahya & Ruzita Abdul-Rahim & Rasidah Mohd-Rashid, 2015. "Impact of Lock-Up Provision on Two IPO Anomalies in the Immediate Aftermarket," Capital Markets Review, Malaysian Finance Association, vol. 23(1&2), pages 25-39.
    • Handle: RePEc:mfa:journl:v:23:y:2015:i:1&2:p:25-39
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    Cited by:

    1. Syamsyul Samsudin & Nik Nur Shafika Mustafa & Nor Haliza Hamzah & Che Khalilah Mahmood, 2020. "Unlock Day Expiration and Mandatory IPOs Lock up Among ACE Firms in Malaysia," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(3), pages 131-138, June.
    2. Chew Xin-Er & Ng Sin Huei & Ong Tze San & Teh Boon Heng, 2020. "Underpinning Theories of IPO Underpricing: Evidence from Malaysia," International Journal of Asian Social Science, Asian Economic and Social Society, vol. 10(10), pages 560-573, October.

    More about this item

    Keywords

    Lock-up Provision; Initial Return; Flipping Activity; Malaysian IPO Market.;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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