The Impact Of IPO Lock-up Expiration On Stock Returns In China’s Growth Enterprise Market

In the China stock market, there are several types of non-tradable shares according to their sources, such as IPO, non-tradable shares reform and additional offering. After an initial public offering, most existing shareholders are subject to a lock-up period, in which they cannot sell their shares for a prespecified time. At the end of the lock-up, these shares become tradable. In theory, the lock-up expiration may encourage original shareholders to sell shares and make profit, which will influence the supply-demand balance, stock evaluation and investors’confidence.China Growth Enterprise Market is special for its high growth expectation, high valuation and centralized stock holding by achieve congenial compose. The young market starts in 2010 and is far from mature. In this case, the influence of large scale lock-up expiration may be more significant in this market. Therefore, it is necessary to investigate how stock returns react shortly before and after the lock-up expiration, which is defined as an event period.This study investigates how the lock-up expiration makes influence on the stock return, with a sample got from China Growth Enterprise Market 2013. At first, there is a introduction about non-tradable shares and Growth Enterprise Market, together with descriptive statistics about the lock-up expiration. After a literature review, the study then investigates the influence implying Event Study method, makes some tests and tries to explain the results. At last, there are some policy suggestions for dealing with the lock-up expiration and its potential influences, with order to improve the resource allocation in the security markets and to make the China stock market more efficient.