Publication Type
Working Paper
Version
publishedVersion
Publication Date
2-2009
Abstract
Several studies on the expiration of IPO lockups document a strong negative reaction even though the unlock event is devoid of any informational content. The empirical finding has remained a conundrum. In this paper, we find that changes in liquidity can account for the observed stock price reaction around lockup expiration. Specifically, firms which show improvement in liquidity subsequent to the unlock day experience positive abnormal returns in the post-expiration period, and vice versa. Another interesting conclusion that emerges from our research is that liquidity changes can predict future abnormal returns. Our results remain robust to the use of alternate procedures to characterize unexpected changes in liquidity.
Keywords
Lockup expiration, Illiquidity
Discipline
Finance
Research Areas
Finance
Identifier
10.2139/ssrn.1341465
Publisher
SSRN
Citation
KRISHNAMURTI, Chandrasekhar; SUBRAHMANYAM, Avanidhar; and THONG, Tiong Yang.
Can liquidity shifts explain the lockup expiration effect in stock returns?. (2009).
Available at: https://ink.library.smu.edu.sg/lkcsb_research/6442
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
http://doi.org/10.2139/ssrn.1341465