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Why Do Insiders Sell Shares Following IPO Lockups?


  • Hsuan-Chi Chen,

  • Sheng-Syan Chen,

  • Chia-Wei Huang

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    • Hsuan-Chi Chen is an Associate Professor of Finance at the Anderson School of Management, University of New Mexico in Albuquerque, NM. Sheng-Syan Chen is a Professor of Finance at the College of Management, National Taiwan University in Taipei, Taiwan. Chia-Wei Huang is an Assistant Professor of Finance at the College of Management, Yuan Ze University in Chung-Li, Taiwan.

  • The authors wish to thank an anonymous referee, Bill Christie (Editor), Yufen Fu, Jay Ritter, Hsiu-Chuan Yeh, and seminar participants at National Chiao Tung University, National Taiwan University, Yuan Ze University, and the 2010 meetings of Taiwan Finance Association for their valuable comments and Wenchun Lin for her capable research assistance. Hsuan-Chi Chen gratefully acknowledges support from the National Science Council of Taiwan while he was at Yuan Ze University and support from the Anderson School of Management at the University of New Mexico. Sheng-Syan Chen gratefully acknowledges financial support from Excellent Research Projects of National Taiwan University. The authors also gratefully acknowledge the editing assistance of Marni Elci and Wendy Jennings.


We examine long run returns subsequent to the lockup expiration of firms having gone public. We find that returns are negatively associated with abnormal selling by senior executives but unrelated to selling by other insiders. Our results suggest that even though lockup expirations provide an initial opportunity for insiders to diversify their holdings by selling a firm's shares, sales by senior executives are still motivated in part by private information. Sales by other insiders, on the other hand, are consistent with portfolio diversification.

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