Lock-up provision and performance of IPOs

Effect of information asymmetry

Research output: Chapter in Book/Report/Conference proceedingConference contribution

6 Citations (Scopus)

Abstract

A lock-up agreement ensures that major shareholders retain a significant economic interest in the companies after the IPOs and rationally, insiders will not adhere to such a commitment unless they see its benefits outweigh its costs. Nonetheless, in Malaysia more stringent lock-up term is imposed on riskier firms that the provision should contribute positively to IPO performance as postulated in risk-return trade-off theory. Since signaling is more prevalent when information asymmetry is high, its effect needs to be considered when examining the relationship between lock-up provision and initial returns in a developing market like Malaysia. Using a sample of 375 IPOs listed on Bursa Malaysia from 2000 to 2012, this study examines the information asymmetry effect by creating sub-samples based on Fama-French's size factor. Results show that lock-up period is significantly positive in influencing IPO initial returns. Further analyses however indicate that the finding is more consistent with quality rather than risk hypothesis. Since there is barely any difference in the effect of lock-up variables on IPOs of small versus big firms, this study concludes that evidence of effect of information asymmetry hypothesis is yet to be established.

Original languageEnglish
Title of host publicationRecent Trends in Social and Behaviour Sciences - Proceedings of the 2nd International Congress on Interdisciplinary Behavior and Social Sciences 2013, ICIBSoS 2013
PublisherTaylor and Francis - Balkema
Pages129-134
Number of pages6
ISBN (Print)9781138001213
Publication statusPublished - 2014
Event2nd International Congress on Interdisciplinary Behavior and Social Science, ICIBSoS 2013 - Jakarta
Duration: 4 Nov 20135 Nov 2013

Other

Other2nd International Congress on Interdisciplinary Behavior and Social Science, ICIBSoS 2013
CityJakarta
Period4/11/135/11/13

Fingerprint

asymmetry
Malaysia
performance
firm
shareholder
commitment
market
costs
evidence
economics

ASJC Scopus subject areas

  • Sociology and Political Science

Cite this

Mohd Rashid, R., Abdul Rahim, R., Yong, O., & Md Nor, A. H. S. (2014). Lock-up provision and performance of IPOs: Effect of information asymmetry. In Recent Trends in Social and Behaviour Sciences - Proceedings of the 2nd International Congress on Interdisciplinary Behavior and Social Sciences 2013, ICIBSoS 2013 (pp. 129-134). Taylor and Francis - Balkema.

Lock-up provision and performance of IPOs : Effect of information asymmetry. / Mohd Rashid, R.; Abdul Rahim, Ruzita; Yong, Othman; Md Nor, Abu Hassan Shaari.

Recent Trends in Social and Behaviour Sciences - Proceedings of the 2nd International Congress on Interdisciplinary Behavior and Social Sciences 2013, ICIBSoS 2013. Taylor and Francis - Balkema, 2014. p. 129-134.

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Mohd Rashid, R, Abdul Rahim, R, Yong, O & Md Nor, AHS 2014, Lock-up provision and performance of IPOs: Effect of information asymmetry. in Recent Trends in Social and Behaviour Sciences - Proceedings of the 2nd International Congress on Interdisciplinary Behavior and Social Sciences 2013, ICIBSoS 2013. Taylor and Francis - Balkema, pp. 129-134, 2nd International Congress on Interdisciplinary Behavior and Social Science, ICIBSoS 2013, Jakarta, 4/11/13.
Mohd Rashid R, Abdul Rahim R, Yong O, Md Nor AHS. Lock-up provision and performance of IPOs: Effect of information asymmetry. In Recent Trends in Social and Behaviour Sciences - Proceedings of the 2nd International Congress on Interdisciplinary Behavior and Social Sciences 2013, ICIBSoS 2013. Taylor and Francis - Balkema. 2014. p. 129-134
Mohd Rashid, R. ; Abdul Rahim, Ruzita ; Yong, Othman ; Md Nor, Abu Hassan Shaari. / Lock-up provision and performance of IPOs : Effect of information asymmetry. Recent Trends in Social and Behaviour Sciences - Proceedings of the 2nd International Congress on Interdisciplinary Behavior and Social Sciences 2013, ICIBSoS 2013. Taylor and Francis - Balkema, 2014. pp. 129-134
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