Title: Impact of a regulatory change on initial performance of IPOs

Authors: Rasidah Mohd-Rashid; Ruzita Abdul-Rahim; Norliza Che-Yahya; Ahmad Hakimi Tajuddin

Addresses: School of Economics, Finance and Banking, Universiti Utara Malaysia, 06010, Sintok, Kedah, Malaysia ' Faculty of Economics and Management, Universiti Kebangsaan Malaysia, 43600, Bangi, Selangor, Malaysia ' Faculty of Business Management, Universiti Teknologi MARA, 42300, Puncak Alam Campus, Selangor, Malaysia ' Taylor's Business School, Taylor's University, 47500, Subang Jaya, Selangor, Malaysia

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.

Keywords: lock-up ratio; lock-up period; signalling; IPOs; initial performance; regulatory; multiple regressions; Asian; Bumiputera requirement; Malaysia.

DOI: 10.1504/AAJFA.2019.100981

Afro-Asian Journal of Finance and Accounting, 2019 Vol.9 No.3, pp.332 - 348

Available online: 18 Jul 2019 *

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