The Expiry of Lock-In Agreements of UK Ipos: A Look at the Directors' Trading Activity

39 Pages Posted: 14 Jun 2003

See all articles by Susanne Espenlaub

Susanne Espenlaub

University of Manchester - Division of Accounting and Finance

Marc Goergen

IE Business School, IE University; European Corporate Governance Institute (ECGI)

Arif Khurshed

University of Manchester - Manchester Business School, Division of Accounting Finance

Marko Remenar

Zagrebacka Banka

Abstract

Most UK IPOs include lock-in agreements, which prevent the directors and other initial shareholders from selling their shares for a specified period after the IPO. Using a sample of 94 UK IPOs, we analyse their stock performance around the time of expiry of the lock-in agreements. We also look at the volume and pattern of directors' sales before and after the expiry of the lock-in agreement. We find that the average cumulative abnormal return around the lock-in expiry is negative and is significantly different from zero. However, examining stock performance around the lock-in expiry in the UK is not straightforward.

The announcement effect of directors' sales on the stock performance is examined as well. The increase in stock sales by directors in the weeks immediately after the lock-in expiry is substantial. Interestingly and unexpectedly, the sub-sample of the companies that reported directors' sales in the period of interest had lower negative average cumulative abnormal returns, albeit not statistically significant, than the sub-sample of the companies that had no reported sales. Finally, the likelihood of directors' sales occurring around the expiry of the lock-in agreement is investigated.

Keywords: Initial Public Offerings, Lock-in, High-Tech

JEL Classification: G24, G34

Suggested Citation

Espenlaub, Susanne K. and Goergen, Marc and Khurshed, Arif and Remenar, Marko, The Expiry of Lock-In Agreements of UK Ipos: A Look at the Directors' Trading Activity. Available at SSRN: https://ssrn.com/abstract=394964 or http://dx.doi.org/10.2139/ssrn.394964

Susanne K. Espenlaub

University of Manchester - Division of Accounting and Finance ( email )

Crawford House
Oxford Road
Manchester M13 9PL
United Kingdom
44 161 275 4026 (Phone)

Marc Goergen

IE Business School, IE University ( email )

Finance Department
Maria de Molina, 12
Madrid, 28006
Spain

HOME PAGE: http://www.ie.edu/business-school/faculty-and-research/faculty/marc-goergen/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Arif Khurshed (Contact Author)

University of Manchester - Manchester Business School, Division of Accounting Finance ( email )

Crawford House
Oxford Road
Manchester, M15 6PB
United Kingdom
+44 0 161 275 4475 (Phone)
+44 0 161 275 4023 (Fax)

Marko Remenar

Zagrebacka Banka ( email )

Zagreb
Croatia

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