CEO power, equity ownership and underwriter reputation as determinants of lockup period length

Abstract

Purpose

The purpose of the research is to study how Chief Executive Officer’s (CEO’s) ownership, CEO’s structural and expertise power and underwriters’ reputation affect the initial public offering (IPO) lockup period.

Design/methodology/approach

The study uses the multivariate regression method to test the hypothesis on a sample of 1,071 US IPOs, which comprise 80 per cent of the total population of IPOs over the 1998-2002 period.

Findings

It was found that CEO equity ownership had a direct positive impact and two indicators of CEO positional power (CEO duality, founder status) and underwriter reputation had a direct negative impact on the length of the lockup period that results from IPO negotiations between the issuing firm and the underwriter. It was also found that underwriter reputation negatively moderates the impact of equity ownership (likely due to a substitution effect) and positively moderates the impact of CEO duality on lockup period length (by offsetting the impact of CEO positional power).

Originality/value

Previous studies have exclusively studied the affect of economic factors on IPO lockup. This paper extends the extant literature by studying the insider’s characteristics like CEO’s power and underwriter’s reputation on IPO lockup periods.

Citation

He, L., Cordeiro, J.J. and Shaw, T.S. (2015), "CEO power, equity ownership and underwriter reputation as determinants of lockup period length", Management Research Review, Vol. 38 No. 5, pp. 438-458. https://doi.org/10.1108/MRR-02-2015-0034