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Signaling in New Ventures: The Use and Impact of the Lockup Period at the Time of the Initial Public OfferingJonathan D. ArthursWashington State University Lowell W. BusenitzUniversity of Oklahoma - Michael F. Price College of Business Robert E. HoskissonArizona State University (ASU) - Management Department Richard JohnsonUniversity of Oklahoma 2005 Babson College Entrepreneurship Research Conference (BCERC), 2005 Frontiers of Entrepreneurship Research, 2005 Abstract: The lockup period is an agreement by the current owners of a new venture to not sell or dispose of their shares without the approval of the investment banker underwriting the shares of the initial public offering (IPO). We investigated the lockup period of a sample of 313 new ventures going through the IPO and find that a longer lockup period acts as a substitute signal to VC and prestigious underwriter backing. Furthermore, we find that ventures which have a going concern issue can reduce the amount of underpricing at the time of the IPO by enduring a longer lockup period.
Number of Pages in PDF File: 12 Keywords: Entrepreneurship JEL Classification: M13 Accepted Paper SeriesDate posted: December 19, 2009Suggested CitationContact Information
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