Impact of a regulatory change on initial performance of IPOs

Rasidah Mohd-Rashid, Ruzita Abdul-Rahim, Norliza Che-Yahya and Ahmad Hakimi Tajuddin

Afro-Asian Journal of Finance and Accounting, 2019, vol. 9, issue 3, 332-348

Abstract: The purpose of this paper is to examine the impact of the Malaysian IPO regulatory change involving lock-up provisions on the initial performance of Malaysian IPOs. This study examines the impact of the revision in the IPO lock-up provision that took effect on February 2008 on the initial returns of 373 IPOs listed between January 2000 and December 2012, using cross-sectional multiple regressions. The findings indicate that the dummy of the lock-up period is positive and significant, validating that the dramatic drop in initial performance of Malaysian IPOs is an attribute of the shorter lock-up period regime. The new shorter lock-up period regime leaves fewer opportunities for speculation activities through IPOs. Investors may strategise to participate in firms that report higher lock-up ratio as it is likely to increase the initial returns.

Keywords: lock-up ratio; lock-up period; signalling; IPOs; initial performance; regulatory; multiple regressions; Asian; Bumiputera requirement; Malaysia. (search for similar items in EconPapers)
Date: 2019
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