Signaling in New Ventures: The Use and Impact of the Lockup Period at the Time of the Initial Public Offering

Babson College Entrepreneurship Research Conference (BCERC), 2005

Frontiers of Entrepreneurship Research, 2005

12 Pages Posted: 19 Dec 2009

See all articles by Jonathan D. Arthurs

Jonathan D. Arthurs

Washington State University

Lowell W. Busenitz

University of Oklahoma - Michael F. Price College of Business

Robert E. Hoskisson

Arizona State University (ASU) - Management Department

Richard Johnson

University of Oklahoma

Date Written: 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.

Keywords: Entrepreneurship

JEL Classification: M13

Suggested Citation

Arthurs, Jonathan D. and Busenitz, Lowell W. and Hoskisson, Robert E. and Johnson, Richard, Signaling in New Ventures: The Use and Impact of the Lockup Period at the Time of the Initial Public Offering (2005). Babson College Entrepreneurship Research Conference (BCERC), 2005. Available at SSRN: https://ssrn.com/abstract=1508538

Jonathan D. Arthurs (Contact Author)

Washington State University ( email )

Wilson Rd.
College of Business
Pullman, WA 99164
United States

Lowell W. Busenitz

University of Oklahoma - Michael F. Price College of Business ( email )

307 West Brooks
Norman, OK 73019-4004
United States

Robert E. Hoskisson

Arizona State University (ASU) - Management Department ( email )

Main Campus
PO Box 874006
Tempe, AZ 85287-4006
United States

Richard Johnson

University of Oklahoma ( email )

307 W Brooks
Norman, OK 73019
United States

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