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Market reaction to the expiration of IPO lockup provisions

James C. Brau (Department of Business Management, Marriott School of Management, Brigham Young University, Provo, Utah, USA)
David A. Carter (Department of Finance, College of Business Administration, Oklahoma State University, Stillwater, Oklahoma, USA)
Stephen E. Christophe (School of Management, George Mason University, Fairfax, Viginia, USA)
Kimberly G. Key (School of Accountancy, College of Business, Auburn University, Auburn, Alabama, USA)

Managerial Finance

ISSN: 0307-4358

Article publication date: 1 January 2004

1362

Abstract

Initial public offering (IPO) lockup agreements prevent insider sale of shares for specified periods of time (often 180 days). This study investigates share price reactions at and around the time the lockup agreements expire. Results indicate statistically significant negative abnormal returns in the event window surrounding the expiration date. The results are consistent with informational asymmetries and decreasing incentive alignment between insiders and general shareholders. In addition, multivariate analysis identifies several variables that help explain these abnormal returns.

Keywords

Citation

Brau, J.C., Carter, D.A., Christophe, S.E. and Key, K.G. (2004), "Market reaction to the expiration of IPO lockup provisions", Managerial Finance, Vol. 30 No. 1, pp. 75-91. https://doi.org/10.1108/03074350410768859

Publisher

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Emerald Group Publishing Limited

Copyright © 2004, Emerald Group Publishing Limited

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