Krishnamurti, Chandrasekhar, and Thong, Tiong Yang (2008) Lockup expiration, insider selling and bid-ask spreads. International Review of Economics & Finance, 17 (2). pp. 230-244.

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Abstract

Contrary to our expectation that lockup expiration should result in an exacerbation of the information asymmetry problem faced by market makers, we find an improvement in secondary market liquidity in the post-expiration period. For the subset of firms with reported insider sales during the 10-day post-lockup expiration period, bid-ask spreads reduce by a larger percentage -- mainly due to a decline in the adverse selection component. VC-backed firms also experience a decline in quoted and effective spreads in the post-lockup period as compared to non-VC firms. Our empirical results show that insider selling and VC unwinding both improve liquidity after unlock day. However, only insider selling is associated with a reduction in the adverse selection component of spread.

Item ID:	69461
Item Type:	Article (Research - C1)
ISSN:	1873-8036
Copyright Information:	© 2007 Elsevier Inc. All rights reserved
Date Deposited:	28 Sep 2021 21:30
FoR Codes:	35 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 3502 Banking, finance and investment > 350202 Finance @ 100%
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