Shareholder Lock-In Contracts: Share Price and Trading Volume Effects at the Lock-In Expiry

54 Pages Posted: 30 Nov 2005

See all articles by Peter-Paul Angenendt

Peter-Paul Angenendt

Independent

Marc Goergen

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

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2005

Abstract

This paper unveils the diversity in lock-in agreements of firms listed on the Nouveau Marche stock exchange in France. We give the main economic reasons why shareholders adopt lock-in agreements that are more stringent than legally required. We relate the abnormal returns and the abnormal volume at the expiry dates of the different types of lock-in contracts to the degree of underpricing, venture-capitalist reputation and underwriter reputation. Abnormal returns and trading volume increase at the lock-in expiry; this is especially pronounced at the expiry dates of insider lock-in contracts as insiders are legally required to be locked-in. We do not find significant abnormal returns at the expiries of VC contracts, even though trading volume increases at their lock-in expiry. There is also no evidence of a positive (negative) relation between abnormal returns (abnormal volume) and more stringent lock-in contracts. Lock-in contracts and the degree of underpricing are complementary signaling devices.

Keywords: Lock-in Agreements, Nouveau Marche, Abnormal Returns and Volumes

JEL Classification: G30, G34, G38

Suggested Citation

Angenendt, Peter-Paul and Goergen, Marc and Renneboog, Luc, Shareholder Lock-In Contracts: Share Price and Trading Volume Effects at the Lock-In Expiry (November 2005). ECGI - Finance Working Paper No. 102/2005. Available at SSRN: https://ssrn.com/abstract=853045 or http://dx.doi.org/10.2139/ssrn.853045

Peter-Paul Angenendt

Independent ( email )

Alteburger Straße 59
50678 Köln
Germany
+49 1784938834 (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 ECARES ULB CP 114
B-1050 Brussels
Belgium

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

Luc Renneboog (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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