Empirical Research On The Response To The Expiration Of IPO Lockup Provisions In The Chinese GEM

In the face of the GEM was born in China soon, Chinese investors lack the skills and ability to resist risks and the current high prices, Restricted in the GEM are set to protect small investors’ interest. once the shares lifted, the low investment costs will determine the VC to withdraw as soon as possible, Venture capital institutions will transfer the listing of shares as a means of exit, once the shares lifted’ the low investment costs will determine the VC to withdraw as soon as possible, rather then according to the secondary market price to decide whether exit. Therefore, the possibility of selling shares by these investors is great. Compared to the U.S. Nasdaq, Hong Kong GEM, the UK AIM market and other foreign GEM, the PE of Chinese GEM is much higher and raised funds is more greater, in this case, the VC and PE holdings after the lift is inevitable. The reason I choosing the GEM rather then the whole market to analyze the expiration of IPO lockup provisions is specificity that the higher PE and the presence of venture capital institutions. The problem of the paper studies is the response to the expiration of IPO lockup provisions, it is through the CARa,t (average cumulative abnormal returns) of samples to observe the impact of the expiration of IPO lockup provisions on market returns. In addition, we classify the companies into the equipment manufacturing, the medicine and medical, the computer software, the service, the chemical manufacturing and other types. From this classification, we can observe the difference of the response to the expiration between those types.In this paper, we analyze the market response of300001-300100in GEM to the expiration of IPO lockup provisions through the event study method. We chose the day of the expiration as the event day, and calculate the AR (abnormal returns), CAR (cumulative abnormal returns) of the expiration before and after10days, then draw the graph about AR and CAR and get the conclusion:for the whole market, there is some market response to the expiration of IPO lockup provisions in the event window period, but the response is very little. As the current high price and PE in the GEM, shareholders which have the lifted shares will inevitably reduce their shares as more as possible. In this case, the CARa,t that after the response to the expiration of IPO lockup provisions will not decline as little as-4.14%in the graph1and the ARa,t in the day of the expiration will be the negative rather than0.54%if the whole market have sensitive reaction to the expiration. So the little decline of the CARa,t should be attributed to the shareholders reduction behavior but not the whole market’s concern for the expiration. We think the reason for the ARa,t get a little increased before the expiration is probably that some stakeholders deliberately raise the price. According to the two views above, we can judge that there is a few people give a response to the expiration and the whole market do not has a concern for it. In the analysis for the types, the response of the equipment manufacturing type and the computer software type is similar with the whole market. The medicine and medical type and the serves type have some difference with the whole market. The chemical manufacturing type is entirely different with the whole market and other types; meanwhile, this response is not in line with expectations. For this difference, we think it will due to the insufficient response of the whole market facing the expiration.