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The Choice and Role of Lockups in IPOs: Evidence from Heterogeneous Lockup Agreements

Hafiz Hoque Orcid Logo

Financial Markets, Institutions & Instruments, Volume: 20, Issue: 5, Pages: 191 - 220

Swansea University Author: Hafiz Hoque Orcid Logo

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Abstract

This paper analyses heterogeneous lockup agreements from the London Stock Market. With hand-collected data, I compare and contrast absolute-date lockups with the relative-date lockups and single lockups versus staggered lockups. This paper tests several potential explanations for the choice of locku...

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Published in: Financial Markets, Institutions & Instruments
ISSN: 0963-8008
Published: ©2011 New York University Salomon Center and Wiley Periodicals, Inc. 2011
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URI: https://cronfa.swan.ac.uk/Record/cronfa6921
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Abstract: This paper analyses heterogeneous lockup agreements from the London Stock Market. With hand-collected data, I compare and contrast absolute-date lockups with the relative-date lockups and single lockups versus staggered lockups. This paper tests several potential explanations for the choice of lockup contracts: (i) information asymmetry, (ii) signaling, (iii) agency problem, and (iv) certification. I find strong evidence for information asymmetry and certification (VC and prestigious underwriters) and partial support for agency explanation for the choice of lockups. The insider selling activity and lockup expiration returns are also consistent with asymmetric information, certification and agency hypothesis.
Keywords: Heterogeneous IPO lockups;insider trades;information asymmetry;London Stock Exchange
College: School of Management
Issue: 5
Start Page: 191
End Page: 220