Information Discovery in Share Lockups: Evidence from the Split-share Structure Reform in China

Financial Management, Forthcoming.

PBCSF-NIFR Research Paper No. 08-01

41 Pages Posted: 16 Oct 2008 Last revised: 18 Feb 2016

See all articles by Li Liao

Li Liao

Tsinghua University - School of Economics & Management

Bibo Liu

Tsinghua University - PBC School of Finance

Hao Wang

Tsinghua University

Date Written: May 25, 2010

Abstract

We document a prominent abnormal stock return of -14% during the [-12''8 20] day window around 482 lockup expirations in the Split-share Structure Reform in China. The abnormal stock returns (selling volumes) are positively (negatively) correlated to firm information transparency and post-reform performance improvement, but negatively (positively) correlated to level of agency problems, suggesting the existence of information-based trading during the lockups. We present important evidence that institutional investors, especially mutual funds, possess superior information discovering capability than individual investors. Our findings confirm the information roles of lockups as a tool to signal firm quality and a commitment device to alleviate agency problems.

Keywords: Information Discovery, Lockup Expiration, Split-share Structure Reform, Institutional Investors, Abnormal Stock Returns

JEL Classification: G14, G30

Suggested Citation

Liao, Li and Liu, Bibo and Wang, Hao, Information Discovery in Share Lockups: Evidence from the Split-share Structure Reform in China (May 25, 2010). Financial Management, Forthcoming., PBCSF-NIFR Research Paper No. 08-01, Available at SSRN: https://ssrn.com/abstract=1285128

Li Liao

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China
8610-62789788 (Phone)

Bibo Liu

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

Hao Wang (Contact Author)

Tsinghua University ( email )

318 Weilun Building
Tsinghua University
Beijing, 100084
China
86 10 62797482 (Phone)
86 10 62794554 (Fax)

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