Journal of Contemporary Eastern Asia

World Association for Triple Helix and Future Strategy Studies (세계트리플헬릭스미래전략학회)
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New evidence of Lockup Provisions: Effects on IPO Demands

  • Mohd-Rashid, Rasidah (School of Economics, Finance and Banking, Universiti Utara Malaysia) ;
  • Khaw, Karren Lee-Hwei (University of Waikato, The University of Wakaito Joint Institute at Zhejiang, University City College) ;
  • Mehmood, Waqas (School of Economics, Finance and Banking, Universiti Utara Malaysia) ;
  • Tajuddin, Ahmad Hakimi (School of Accounting and Finance, Taylor's University)
  • Published : 2022.06.15
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Abstract

This study examines the impacts of a mandatory lockup ratio and lockup period, together with voluntary lockup, on the initial public offering (IPO) subscription rate in Malaysia. A sample of 390 IPOs launched from 2000 to 2016 was collected for analysis. The findings show that firms that adopt a lower lockup ratio and a shorter lockup period signal uncertainty about their prospects. Issuers would then show the tendency to underprice to increase investors' intention to subscribe to firms' IPO shares. This study concludes that as long as investors are aware of pertinent information about IPO firms, they should continue participating in the IPO market rather than behaving irrationally. Finally, policymakers could use the findings to improve the existing lockup provisions regulation.

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References

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