Abnormal Initial Public Offering (IPO) Price Performance and the Lockup Expiration: Parametric and Nonparametric Tests of Abnormal Performance Occurring at the Expiration of the Lockup Period from 1985 to 2002

2009 ◽  
Author(s):  
Zachary Smith
Keyword(s):  
Initial Public Offering ◽  
Nonparametric Tests ◽  
Price Performance ◽  
Public Offering ◽  
Abnormal Performance ◽  
Lockup Expiration ◽  
Lockup Period

IPO overvaluation and returns prior to lockup expiration

2017 ◽  
Vol 43 (12) ◽  
pp. 1392-1410 ◽  
Author(s):  
K. Stephen Haggard ◽  
Yaoyi Xi
Keyword(s):  
Stock Returns ◽  
Initial Public Offering ◽  
Price Reduction ◽  
Content Type ◽  
Investment Portfolios ◽  
Public Offering ◽  
Lockup Expiration ◽  
The Impact ◽  
Practical Implications ◽  
Lockup Period

Purpose Conventional wisdom says that the price reduction stocks experience at expiration of the initial public offering (IPO) lockup period is due to relaxation of selling constraints. Findings from more recent literature question this explanation. The purpose of this paper is to examine a different cause for this price drop, IPO overvaluation. Design/methodology/approach Using the IPO overvaluation measures of Purnanandam and Swaminathan (2004), the authors examine IPO lockup period stock return differences between stocks in the highest and lowest overvaluation quintiles. Findings The authors show that the IPO lockup period price reduction is strongly related to overvaluation. Zero-investment portfolios long in the lowest overvaluation quintile and short in the highest overvaluation quintile of IPO firms have positive significant returns. Practical implications IPO investors can use the technique to identify firms likely to underperform in the IPO lockup period, potentially avoiding bad investments. Originality/value This is the first study to link IPO lockup period stock returns to IPO overvaluation, providing evidence on the impact of both overvaluation and short-selling constraints on stock returns in the IPO lockup period.

Valuation Uncertainty and Short-Sales Constraints: Evidence from the IPO Aftermarket

2021 ◽  
Author(s):  
Panos N. Patatoukas ◽  
Richard G. Sloan ◽  
Annika Yu Wang
Keyword(s):  
Detailed Analysis ◽  
Initial Public Offering ◽  
Equity Market ◽  
Short Sales ◽  
Market Data ◽  
Market Mispricing ◽  
Valuation Uncertainty ◽  
Public Offering ◽  
Lockup Expiration

We use the initial public offering (IPO) setting to provide evidence that the combination of valuation uncertainty and short-sales constraints generates significant equity market mispricing. The IPOs that we predict to be most susceptible to overpricing in the immediate aftermarket have first-day returns of +47% and lockup expiration returns of [Formula: see text]9%. Our detailed analysis of securities lending market data confirms that these IPOs experience severe short-sales constraints that peak around the lockup expiration. Our paper both explains the anomalous pricing of IPOs and highlights the importance of valuation uncertainty and short-sales constraints in explaining equity mispricing. This paper was accepted by Brian Bushee, accounting.

scholarly journals Earnings Quality and Ownership Structure: The Role of Private Equity Sponsors

2009 ◽  
Vol 84 (3) ◽  
pp. 623-658 ◽  
Author(s):  
Sharon P. Katz
Keyword(s):  
Initial Public Offering ◽  
Stock Price ◽  
Private Equity ◽  
Earnings Quality ◽  
Price Performance ◽  
Before And After ◽  
Public Offering ◽  
Long Term Performance ◽  
Term Performance

ABSTRACT: This study explores how firms' ownership structures affect their earnings quality and long-term performance. Focusing on a unique sample of private firms for which there is financial data available in the years before and after their initial public offering (IPO), I differentiate between those that have private equity sponsorship (PE-backed firms) and those that do not (non-PE-backed firms). The findings indicate that PE-backed firms generally have higher earnings quality than those that do not have PE sponsorship, engage less in earnings management, and report more conservatively both before and after the IPO. Further, PE-backed firms that are majority-owned by PE sponsors exhibit superior long-term stock price performance after they go public. These results stem from the professional ownership, tighter monitoring, and reputational considerations exhibited by PE sponsors.

Earnings Management During Lockup in Explaining IPO Operating Underperformance

2015 ◽  
Vol 18 (01) ◽  
pp. 1550002 ◽  
Author(s):  
Tsai-Ling Liao ◽  
Chih-Jen Huang ◽  
Hsiao-Chi Liu
Keyword(s):  
Earnings Management ◽  
Initial Public Offering ◽  
High Tech ◽  
Return On Assets ◽  
Management Behavior ◽  
Reversal Effect ◽  
Public Offering ◽  
Lockup Expiration ◽  
The Relationship

This study examines the relationship between initial public offering (IPO) managers' earnings management behavior during lockup (measured with discretionary accruals, DAs) and operating performance following lockup expiration (measured with operating return on assets, OPROAs). Based on a U.S. IPO sample, the results indicate that DAs during lockup are significantly higher than after lockup expiration. In addition, the reversal effect of DAs results in a negative association of DAs in lockup with post-lockup OPROAs. This negative relation is primarily concentrated in small-sized, non-venture backed, high-tech, and hot-market issued IPOs and is consistent with prior findings that such IPO firms have poorer post-issue performance. The overall evidence supports the role of managerial earnings management behavior during lockup in explaining post-IPO operating underperformance.

EMPLOYEE EQUITY INCENTIVES AND VENTURE CAPITALIST INVOLVEMENT: EXAMINING THE EFFECTS ON IPO PERFORMANCE

2008 ◽  
Vol 13 (04) ◽  
pp. 409-423 ◽  
Author(s):  
JAMES W. WESTERMAN ◽  
SCOTT W. GEIGER ◽  
LINDA A. CYR
Keyword(s):  
Initial Public Offering ◽  
Stock Price ◽  
Stock Options ◽  
Venture Capitalist ◽  
Venture Capitalists ◽  
Ipo Performance ◽  
Equity Incentives ◽  
Price Performance ◽  
Public Offering ◽  
Positive Effect

We examine the effects of venture capitalist involvement and equity incentives for all employees on the performance of initial public offering firms. Data was collected from 402 IPO firms, representing 242 non-VC backed and 160 VC backed firms. Results indicate venture capitalists positively influence the likelihood the portfolio firm will offer equity incentives to all employees. Consistent with the agency theory argument that monitoring and incentives can behave as complements to one another, the results suggest venture capitalist backing and incentive stock options for all employees operate in concert to have a positive effect on stock price performance three years after the initial public offering.

scholarly journals ANALISIS KINERJA SAHAM EMITEN DAL AM PERIODE SATU TAHUN SETELAH PENAWARAN PERDANA

2009 ◽  
Vol 9 (3) ◽  
pp. 39
Author(s):  
Yusef Widya Karsana
Keyword(s):  
Empirical Study ◽  
Initial Public Offering ◽  
Stock Price ◽  
Abnormal Return ◽  
Short Term ◽  
Price Performance ◽  
Public Offering ◽  
Term Performance

<p align="center"><strong>Abstract</strong></p><p><strong><em>The objective of this research is to examine short term performance of stock </em></strong><strong><em>price after Initial Public Offering (IPO) in Indonesia, and also to know </em></strong><strong><em>whether there are differences between weekly stock price performance and </em></strong><strong><em>monthly stock price performance. The stock price performance is measured by </em></strong><strong><em>abnormal return and wealth Relative. This research is an empirical study for </em></strong><strong><em>the companies which performs IPO in the period of2000 to 2006. Re&gt; ult of the </em></strong><strong><em>analysis shows that all period tested, weekly performance and monthly </em></strong><strong><em>performance, are outperformed. The comparation of the performance shows </em></strong><strong><em>that weekly stock price performance is higher than monthly stock price </em></strong><strong><em>performance.</em></strong></p><p><strong><em>Keywords .'Initial Public Offering, weekly stock price performance, monthly stock priceperformance, abnormal return, wealth relative</em></strong></p>

scholarly journals The Impact of Corporate Governance Mechanisms on the Commitment of Managers in an IPO Setting: Evidence from Korean Small and Venture Firms

2022 ◽  
Vol 14 (2) ◽  
pp. 730
Author(s):  
Youngjoo Lee
Keyword(s):  
Corporate Governance ◽  
Initial Public Offering ◽  
Sustainable Growth ◽  
Audit Committees ◽  
Outside Directors ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms ◽  
Public Offering ◽  
The Impact ◽  
Lockup Period

Managers’ commitment and dedication crucially affect the sustainable growth of firms. When private companies first offer their shares to the public in an initial public offering (IPO), an IPO lockup is one way of revealing managers’ commitments. IPO lockups are agreements that promise not to sell the shares retained by pre-IPO shareholders for a specified period in the market after the IPO. This paper investigates the impact of corporate governance mechanisms on the length of the lockup period. The paper’s sample consists of IPO firms that have gone public in Korea’s KOSDAQ market, which is a listing venue for small and venture companies. The major findings of this paper are as follows: first, the length of the lockup period increases with the number of outside directors and, second, IPO firms with audit committees have longer lockup periods than those without them. These results indicate that managers of firms with greater board independence choose a longer lockup period when going public. This paper also finds that the lockup period is positively related to the presence of venture capitalists serving as directors of IPO firms, which suggests that venture capital directors may ensure that managers have longer lockups. Overall, these findings suggest that, when small and venture companies go public, managers may use the IPO lockup as a commitment device that complements corporate governance mechanisms in reducing investor concern about the moral hazard problem of managers.

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