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

Shamsul Bahrain Mohamed-Arshad, Kamarun Nisham Taufil-Mohd and Nurwati Ashikkin Ahmad-Zaluki
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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

International Journal of Economics and Financial Issues, 2016, vol. 6, issue 3, 958-962

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.

Keywords: Efficient Market; Event Study; Initial Public Offering; Lockup (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Date: 2016
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