Strategic behavior of insiders in initial underpricing and long-run underperformance

Baohua Yang, Yingluo Zhou and Zhong-Guo Zhou

Emerging Markets Review, 2022, vol. 53, issue C

Abstract: We study strategic behavior of insiders in ChiNext IPOs. Since traditional initial underpricing is not appropriate due to the jawbone P/E ratio approach and maximum initial return cap we propose two alternative measures. We identify a significantly positive relationship between insiders' shareholdings and initial underpricing. With no discretion on IPO offer price, the insiders implement earnings management to maintain higher stock prices induced by regulatory changes and high market demand and to facilitate selling their unlocked shares after lockup expiration. We confirm a negative impact from insiders' share sales on long-term performance but don't observe a dramatic underperformance as documented.

Keywords: Initial underpricing; insiders' shareholdings; Earnings management; Lockup-end sell; Long-run underperformance (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:53:y:2022:i:c:s1566014122000577

DOI: 10.1016/j.ememar.2022.100940

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