An Empirical Analysis On The Implication Of The IPO Lock-up Period In Shanghai Stock Market

The issuance of "an initial public issue and listing management approach " marked the circulation open of China A Shares issued era by he China Securities Regulatory Commission in May18,2006. In circulation era, the initial public offering IPO is no longer divided into tradable shares and non-tradable shares, all shares are tradable shares. However, in order to reduce the supply shocks to the secondary market, there are given certain constraints on the traded time reference to the international practice, that is to say, this part of shares can be trade after the certain time. How did this part of shares have impact on the stock price and trading volume, especially the part which is owned by inquiry object and strategic investors. Why does this paper focus on the restricted shares held by inquiry object and strategic investors. The reason is that the holders of this shares more inclined to sell after the expiration of the lock-up period.So, according to the preliminary statistical analysis and multiple regression analysis, this paper focus on the examination that the implications on the price and trading volume of IPO lock-up expiration and qualitative and quantitative analysis on the reasons of this abnormal changes from the aspects of the degree of supply shocks, the company size, the market environment, the operation and the governance structure, and finally measure the stock demand elasticity.According to the above purpose, and through a series of research and analysis, the conclusions of this paper includes:1.there are distinguish implications of the IPO lock-up expiration. The full sample statistics find the significant negative abnormal returns. The CAR (Cumulative Abnormal Return) of sample stocks yields a rate of-4.57%from T_day to T3day, and there is not a reversion during the study period. And on the event day, the CAR yields a rate of-2.19%, meanwhile, the trading volume amplifies extremely, reaching to the degree of177.1%, as well as a long-term mean abnormal trading volume ofl7.55%. 2.According to the sub-sample statistical analysis and regression analysis, the following can be observed:(1) The CAR and the degree of supply shocks are negatively correlated. That is, the larger the scale of restricted shares is, the more the stock price falls, the CAR will be lower during the study period, and vice versa.(2) There is a positive correlation between the CAR and the company size. The larger the scale of company is, the higher the CAR is, and vice versa.(3) The CAR is lower in a bull market than that in a bear market, it appears the more serious negative CAR in bull market.(4) The CAR and the performance of operation are negatively correlated, this deviates from the traditional theory. It can be explained by Merton (1987):The better a company is operated, the higher rate of return is expected, while there is a negative correlation between the CAR and the expected rate of return, thus the CAR will be lower, and vice versa.(5) The CAR and the herfindahl-5are positively correlated. The reason is the choice of the index.3. In order to accurately measure the stock elasticity of demand, this paper establishes a new multiple regression model which include a variable-representing the improvement of mobility. The new model considers that the changes of stock price is impacted both by the supply shock and the improvement of mobility, while the traditional model only considers the impact of supply change. According to the empirical results of the new model, it can be calculated that the stock elasticity of demand in China A-share market is-55.48. this conclusion supports the hypothesis of limited stock elasticity of demand.