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Impact of a regulatory change on initial performance of IPOs

Author

Listed:
  • Rasidah Mohd-Rashid
  • Ruzita Abdul-Rahim
  • Norliza Che-Yahya
  • Ahmad Hakimi Tajuddin

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.

Suggested Citation

  • Rasidah Mohd-Rashid & Ruzita Abdul-Rahim & Norliza Che-Yahya & Ahmad Hakimi Tajuddin, 2019. "Impact of a regulatory change on initial performance of IPOs," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 9(3), pages 332-348.
    • Handle: RePEc:ids:afasfa:v:9:y:2019:i:3:p:332-348
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    Cited by:

    1. Waqas Mehmood & Rasidah Mohd-Rashid & Abd Halim Ahmad, 2023. "The Variability of IPO Issuance: Evidence from Pakistan Stock Exchange," Global Business Review, International Management Institute, vol. 24(5), pages 1025-1040, October.

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