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Share Price and Trading Volume Reactions to Lockup Expiration in Malaysian IPOs

Author

Listed:
  • Shamsul Bahrain Mohamed-Arshad

    (School of Economics, Finance and Banking, Universiti Utara Malaysia, Sintok, Malaysia,)

  • Kamarun Nisham Taufil-Mohd

    (School of Economics, Finance and Banking, Universiti Utara Malaysia, Sintok, Malaysia)

  • Nurwati Ashikkin Ahmad-Zaluki

    (School of Economics, Finance and Banking, Universiti Utara Malaysia, Sintok, Malaysia)

Abstract
This paper examines the market reaction at the expiration of initial public offering (IPO) lockup on share prices and trading volume. The sample consists of 292 IPOs listed on Bursa Malaysia between May 2003 and December 2012. IPO lockup in Malaysia is mandatory as opposed to voluntary where it is negotiated between firms and underwriters. Using the market model event study method, the result shows a significant negative abnormal return at the expiration of the lockup period. Thus, the study provides evidence that contradicts the semi-strong form of the efficient market hypothesis (EMH). According to EMH, the expiration of the lockup period which is public knowledge should not be accompanied with a significant abnormal return. In addition, the study also shows the existence of higher abnormal trading volume at lockup expiration.

Suggested Citation

  • Shamsul Bahrain Mohamed-Arshad & Kamarun Nisham Taufil-Mohd & Nurwati Ashikkin Ahmad-Zaluki, 2016. "Share Price and Trading Volume Reactions to Lockup Expiration in Malaysian IPOs," International Journal of Economics and Financial Issues, Econjournals, vol. 6(3), pages 958-962.
    • Handle: RePEc:eco:journ1:2016-03-18
    as

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    References listed on IDEAS

    as
    1. Hakim, Tatiana & Lypny, Gregory & Bhabra, Harjeet S., 2012. "IPO lockup expiration in the Middle East and North Africa," Journal of Multinational Financial Management, Elsevier, vol. 22(5), pages 252-262.
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    8. Daniel J. Bradley & Bradford D. Jordan & Ha-Chin Yi & Ivan C. Roten, 2001. "Venture Capital And Ipo Lockup Expiration: An Empirical Analysis," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 24(4), pages 465-493, December.
    9. Goergen, Marc & Mazouz, Khelifa & Yin, Shuxing, 2010. "Price, volume and spread effects associated with the expiry of lock-in agreements: Evidence from the Hong Kong IPO market," Pacific-Basin Finance Journal, Elsevier, vol. 18(5), pages 442-459, November.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Efficient Market; Event Study; Initial Public Offering; Lockup;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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