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The Choice and Role of Lockups in IPOs: Evidence from Heterogeneous Lockup Agreements
Author(s) -
Hoque Hafiz
Publication year - 2011
Publication title -
financial markets, institutions and instruments
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.386
H-Index - 23
eISSN - 1468-0416
pISSN - 0963-8008
DOI - 10.1111/j.1468-0416.2011.00169.x
Subject(s) - information asymmetry , initial public offering , certification , agency (philosophy) , business , insider , underwriting , accounting , stock (firearms) , finance , monetary economics , actuarial science , economics , management , mechanical engineering , philosophy , epistemology , political science , law , engineering
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.