Impact of a regulatory change on initial performance of IPOs. (18th July 2019)

• Record Type: Journal Article
• Authors: Mohd-Rashid, Rasidah; Abdul-Rahim, Ruzita; Che-Yahya, Norliza; Tajuddin, Ahmad Hakimi
• Is Part Of: Afro-Asian journal of finance and accounting. Volume 9:Number 3(2019)
• Page Start: 332
• Page End: 348
• Publication Date: 2019-07-18
• Subjects: lock-up ratio -- lock-up period -- signalling -- IPOs -- initial performance -- regulatory -- multiple regressions -- Asian -- Bumiputera requirement -- Malaysia; Accounting -- Africa -- Periodicals; Accounting -- Asia -- Periodicals; Accounting -- Middle East -- Periodicals; 657.0917165
• Languages: English
• ISSNs: 1751-6447

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.