Shareholder Lock-In Contracts

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

P.P. Angenandt, M. Goergen, L.D.R. Renneboog

Research output: Working paperDiscussion paperOther research output

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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 signalling devices.
Original languageEnglish
Place of PublicationTilburg
PublisherFinance
Number of pages50
Volume2005-115
Publication statusPublished - 2005

Publication series

NameCentER Discussion Paper
Volume2005-115

Fingerprint

Share prices
Trading volume
Shareholders
Lock-in
Abnormal returns
Insider
Underpricing
Stock exchange
Economics
Underwriter reputation
Venture capitalists
France

Keywords

  • shareholders
  • venture capital
  • lock-in agreements
  • lock-up contracts
  • lock-in expiry
  • lock-up expiry
  • signaling
  • underwriter reputation
  • underpricing

Cite this

Angenandt, P. P., Goergen, M., & Renneboog, L. D. R. (2005). Shareholder Lock-In Contracts: Share Price and Trading Volume Effects at the Lock-In Expiry. (CentER Discussion Paper; Vol. 2005-115). Tilburg: Finance.
Angenandt, P.P. ; Goergen, M. ; Renneboog, L.D.R. / Shareholder Lock-In Contracts : Share Price and Trading Volume Effects at the Lock-In Expiry. Tilburg : Finance, 2005. (CentER Discussion Paper).
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Angenandt, PP, Goergen, M & Renneboog, LDR 2005 'Shareholder Lock-In Contracts: Share Price and Trading Volume Effects at the Lock-In Expiry' CentER Discussion Paper, vol. 2005-115, Finance, Tilburg.

Shareholder Lock-In Contracts : Share Price and Trading Volume Effects at the Lock-In Expiry. / Angenandt, P.P.; Goergen, M.; Renneboog, L.D.R.

Tilburg : Finance, 2005. (CentER Discussion Paper; Vol. 2005-115).

Research output: Working paperDiscussion paperOther research output

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T1 - Shareholder Lock-In Contracts

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AU - Goergen, M.

AU - Renneboog, L.D.R.

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N2 - 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 signalling devices.

AB - 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 signalling devices.

KW - shareholders

KW - venture capital

KW - lock-in agreements

KW - lock-up contracts

KW - lock-in expiry

KW - lock-up expiry

KW - signaling

KW - underwriter reputation

KW - underpricing

M3 - Discussion paper

VL - 2005-115

T3 - CentER Discussion Paper

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Angenandt PP, Goergen M, Renneboog LDR. Shareholder Lock-In Contracts: Share Price and Trading Volume Effects at the Lock-In Expiry. Tilburg: Finance. 2005. (CentER Discussion Paper).