Underwriter Lock-up Releases, Initial Public Offerings and After-market Performance


  • The author would like to thank Arnold Cowan, Don Cox, and an anonymous referee for their helpful comments. An earlier version of the paper was presented at the Southeastern chapter of INFORMS. Comments by participants at this conference are appreciated.

* Corresponding author: Department of Finance, Banking, and Insurance, Walker College of Business, Appalachian State University, Boone, NC 28608; Phone: (828) 262-6238, Fax: (828) 262-6612, E-mail: keaslertr@appstate.edu


The lock-up agreement between an underwriter and an issuing firm's principals prohibits sale of securities for a period of time following the offering date. Investment banks must support the stock following an offering. The lock-up assures investors that the restricted shares will not enter the market, at least for a period of time. Negative abnormal returns prior to the lock-up release show that unrestricted investors liquidate positions prior to the scheduled lock-up release. Negative abnormal returns are more robust for firms that are not influenced by SEC Rule 144 than for firms that are.