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IPO lockup expiration in the Middle East and North Africa

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  • Hakim, Tatiana
  • Lypny, Gregory
  • Bhabra, Harjeet S.

Abstract

We examine stock market reaction to IPO lockup expiration for a sample of 60 companies in the Middle East and North Africa (MENA) region. Lockups in the MENA are set by regulators as opposed to being negotiated between firms and their underwriters, and are typically longer but vary less than those in the United States. The MENA therefore provides a unique environment in which to study the relationship between lockup length, firm ownership, and market reaction. We find that prices decline on unlock day much the same as they do in the United States. Longer lockups are associated with smaller declines, and this association is driven by non-family owned firms. We also find that family firms subject to longer lockups are more likely to experience bigger declines (or smaller increases) in trading volume than family firms under short lockup, but no such an association exists for non-family firms. Lockup length is negatively related to firm size and positively related to the fraction of IPO shares on offer that are primary, which is consistent with regulators setting shorter lockups for well-established firms and those signaling an ongoing commitment to the business. And while evidence of general IPO underpricing is inconclusive for the MENA, family firms that face short lockups are significantly more likely to enjoy higher returns on their first day of trading than family firms that face long lockups.

Suggested Citation

  • Hakim, Tatiana & Lypny, Gregory & Bhabra, Harjeet S., 2012. "IPO lockup expiration in the Middle East and North Africa," Journal of Multinational Financial Management, Elsevier, vol. 22(5), pages 252-262.
    • Handle: RePEc:eee:mulfin:v:22:y:2012:i:5:p:252-262
    DOI: 10.1016/j.mulfin.2012.06.005
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    References listed on IDEAS

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    1. Abrahamson, Martin & De Ridder, Adri, 2015. "Allocation of shares to foreign and domestic investors: Firm and ownership characteristics in Swedish IPOs," Research in International Business and Finance, Elsevier, vol. 34(C), pages 52-65.
    2. Sahil Narang & Rudra P. Pradhan, 2021. "IPO lock-up: a review and assessment," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 48(3), pages 343-369, September.
    3. Norliza Che Yahya & Ruzita Abdul Rahim, 2019. "Moderating Effect of Information Asymmetry on the Signalling Role of IPO Lockup Provision," Global Business Review, International Management Institute, vol. 20(4), pages 917-930, August.
    4. Shamsul Bahrain Mohamed-Arshad & Kamarun Nisham Taufil-Mohd & Nurwati Ashikkin Ahmad-Zaluki, 2016. "Share Price and Trading Volume Reactions to Lockup Expiration in Malaysian IPOs," International Journal of Economics and Financial Issues, Econjournals, vol. 6(3), pages 958-962.
    5. Mohd Rashid, Rasidah & Abdul-Rahim, Ruzita & Yong, Othman, 2014. "The influence of lock-up provisions on IPO initial returns: Evidence from an emerging market," Economic Systems, Elsevier, vol. 38(4), pages 487-501.
    6. Norliza Che-Yahya & Ruzita Abdul-Rahim, 2015. "Role of Lockup Provision and Institutional Investors in Restricting IPO Flipping Activity: Is There A Moderating Effect of Investor Demand?," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 11(2), pages 1-28.

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    More about this item

    Keywords

    IPO; Underpricing; Lockup; Family firms;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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