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Underwriter Lock‐up Releases, Initial Public Offerings and After‐market Performance
Author(s) -
Keasler Terrill R.
Publication year - 2001
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.2001.tb00008.x
Subject(s) - underwriting , initial public offering , business , lock (firearm) , stock (firearms) , monetary economics , finance , economics , mechanical engineering , engineering
The lock‐up agreement between an underwriter and an issuing firm's principals prohibits sale of securities for a period of time following the offering date. Investment banks must support the stock following an offering. The lock‐up assures investors that the restricted shares will not enter the market, at least for a period of time. Negative abnormal returns prior to the lock‐up release show that unrestricted investors liquidate positions prior to the scheduled lock‐up release. Negative abnormal returns are more robust for firms that are not influenced by SEC Rule 144 than for firms that are.