Impact of IPO lockup expirations and its determinants: Malaysian evidence

This dissertation examines the impact of lockup expiration and its determinants in Malaysia using 292 IPOs during the period 2003-2012. Impact of lockup on abnormal returns, impact of lockup on abnormal trading volume, impact of regulatory changes on abnormal returns, and determinants of share price behavior as a proxy of abnormal returns at lockup expiration are the four study objectives. The research hypotheses are tested using event study method and multiple regressions. Results show the existence of significant negative abnormal returns surrounding the date of lockup expirations, hence contradicting evidence of the efficient market hypothesis. Further, this study also finds the existence of abnormal trading volumes. Both of these results are in line with those of the US studies. Meanwhile, there are two lockup regimes involved in this study arising from regulatory change that takes effect on 1 May 2003 and 3 August 2009, referred to as Regime #I and Regime #2, respectively. However, the results show that the change in lockup regulation does not have an impact on the abnormal returns at lockup expiration. Furthermore, the variables identified in the regression analysis are lockup regime, fractions of insiders buying and selling before and after expiration, company size and age, offer price, underwriter, auditor, and technology company. Results show that company size, fraction of insider selling and buying after lockup expiration are the significant factors in relations to abnormal returns which is driven by Regime #l. Implications of the study to SC are improving the present regulation by imposing the minimum requirement and allowing for longer lockup period to be determined between underwriter and IPO issuer, to Bursa Malaysia in posting the upcoming lockup expiration dates on their website to alert investors, and to research houses by starting coverage on earnings forecast and providing recommendations surrounding lockup expiration