Abstract
| Original language | English |
|---|---|
| Number of pages | 16 |
| Journal | Journal of Accounting, Auditing and Finance |
| DOIs | |
| Publication status | Accepted/In press - 7 May 2019 |
Keywords
- moral hazard
- IPO mandatory lockups
- agency theory
- underpricing and corporate governance
Cite this
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The effects of IPO mandatory lockups and corporate governance on underpricing : evidence from the Australian Securities Exchange. / Haman, Janto; Chalmers, Keryn; Fang, Victor.
In: Journal of Accounting, Auditing and Finance, 07.05.2019.Research output: Contribution to journal › Article › Research › peer-review
TY - JOUR
T1 - The effects of IPO mandatory lockups and corporate governance on underpricing
T2 - evidence from the Australian Securities Exchange
AU - Haman, Janto
AU - Chalmers, Keryn
AU - Fang, Victor
PY - 2019/5/7
Y1 - 2019/5/7
N2 - In Australia, initial public offering (IPO) firms not satisfying profit or asset tests are permitted to list on the securities exchange with mandatory lockups (MLs) imposed on insiders’ shares. We investigate whether such lockups, and the lockup periods, are associated with underpricing. We find that the incremental effect of the association between longer ML periods and higher underpricing is stronger for firms with higher insiders’ equity ownership subject to MLs relative to firms with lower insiders’ equity ownership subject to MLs. This suggests that the extent and length of insiders’ equity ownership subject to MLs convey information regarding IPO firms’ risk. We also find that good corporate governance reduces IPO underpricing for firms with MLs. It moderates the IPO underpricing for firms with higher and longer insiders’ equity ownership subject to MLs. Our findings are informative for regulators in understanding how MLs can assist in allowing smaller and younger firms with inadequate financial strength and performance to publicly raise equity capital, while morally protecting investors and preserving market integrity.
AB - In Australia, initial public offering (IPO) firms not satisfying profit or asset tests are permitted to list on the securities exchange with mandatory lockups (MLs) imposed on insiders’ shares. We investigate whether such lockups, and the lockup periods, are associated with underpricing. We find that the incremental effect of the association between longer ML periods and higher underpricing is stronger for firms with higher insiders’ equity ownership subject to MLs relative to firms with lower insiders’ equity ownership subject to MLs. This suggests that the extent and length of insiders’ equity ownership subject to MLs convey information regarding IPO firms’ risk. We also find that good corporate governance reduces IPO underpricing for firms with MLs. It moderates the IPO underpricing for firms with higher and longer insiders’ equity ownership subject to MLs. Our findings are informative for regulators in understanding how MLs can assist in allowing smaller and younger firms with inadequate financial strength and performance to publicly raise equity capital, while morally protecting investors and preserving market integrity.
KW - moral hazard
KW - IPO mandatory lockups
KW - agency theory
KW - underpricing and corporate governance
U2 - 10.1177/0148558X19846754
DO - 10.1177/0148558X19846754
M3 - Article
JO - Journal of Accounting, Auditing and Finance
JF - Journal of Accounting, Auditing and Finance
SN - 0148-558X
ER -