Signaling and initial public offerings: The use and impact of the lockup period

Jonathan D. Arthurs, Lowell W. Busenitz, Robert E. Hoskisson and Richard A. Johnson

Journal of Business Venturing, 2009, vol. 24, issue 4, pages 360-372

Abstract: To reduce information asymmetries for potential investors considering investment in an IPO venture, owners can signal the firm's longer-term viability and quality in several ways. The lockup period, is one signal that can be offered. We investigated the lockup period of a sample of 640 ventures going through the IPO and find that a longer lockup period acts as a substitute signal to venture capital (VC) and prestigious underwriter backing. Furthermore, we find that ventures which have a going concern issue can reduce the amount of underpricing at the time of the IPO by accepting a longer lockup period.

Keywords: Lockup; period; Signaling; IPO; Underpricing (search for similar items in EconPapers)
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:eee:jbvent:v:24:y:2009:i:4:p:360-372

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