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The Signaling Role of IPO Lockups: Evidence from SMEs in Korea

The Signaling Role of IPO Lockups: Evidence from SMEs in Korea This study examines the signaling role of lockup extensions for initial public offering (IPO) firms subject to mandatory lockup provisions. The sample contains IPO firms that went public in the Korean stock market, which reduced the mandatory lockup period over the sample period. This study finds that (1) IPO underpricing is negatively related to the lockup extension length after the reform, and (2) the negative relationship in the post‐reform period is stronger for firms characterized by high information asymmetry. The results imply that lockup extensions may reduce information asymmetry related to IPO underpricing when information asymmetry is acute. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Asia-Pacific Journal of Financial Studies Wiley

The Signaling Role of IPO Lockups: Evidence from SMEs in Korea

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Publisher
Wiley
Copyright
© 2022 Korean Securities Association
ISSN
2041-9945
eISSN
2041-6156
DOI
10.1111/ajfs.12397
Publisher site
See Article on Publisher Site

Abstract

This study examines the signaling role of lockup extensions for initial public offering (IPO) firms subject to mandatory lockup provisions. The sample contains IPO firms that went public in the Korean stock market, which reduced the mandatory lockup period over the sample period. This study finds that (1) IPO underpricing is negatively related to the lockup extension length after the reform, and (2) the negative relationship in the post‐reform period is stronger for firms characterized by high information asymmetry. The results imply that lockup extensions may reduce information asymmetry related to IPO underpricing when information asymmetry is acute.

Journal

Asia-Pacific Journal of Financial Studies – Wiley

Published: Oct 1, 2022

Keywords: Lockup; Underpricing; Signaling; Information asymmetry; Venture capital; G30; G32; G38

References

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