Effect of Expiration of Initial Public Offerings Silent Period on Returns in The Stock Exchange Thailand

Abstract

The study of the effects on the rate of return around the expiration of the initial public offering (IPO) lockup agreement period in each industry in Thailand provides important information that recognized information during lockup agreement period. This study was aimed to investigate the information asymmetries during lockup agreement period. The study was analyzed by event study methodology to tested average abnormal returns (AAR) and cumulative average abnormal returns (CAAR). The estimation period was divided to two events based on rule. The first event allows strategic shareholders to sell 25% of common stock under the IPO lockup agreement. The final event that shareholders allowed to sell all of common stock under conditions. The analysis was based on data from 433 companies listed between 2003 and June 30 2021 on the Stock Exchange of Thailand (SET) and the Market for Alternative Investment (MAI). The findings revealed that investors had better access to information in the final event than the first event. Small companies MAI had more gaps in recognized information than large companies on SET. In conclusion, the study provides consistent with the hypothesis of efficient markets during the lockup agreement period, but inefficiencies are still evident in some sectors. Especially technology sector and industrial sector listed on SET and the agriculture and food sector in MAI have shown inefficiency in both events. Moreover, negative return rates across all industry sector on the SET. However, the study doesn’t find statistically significant changes impacting forecasts but except for positive findings in the property and construction sector. Overall, while the market shows efficiency, specific sectors reveal inefficiencies due to information asymmetry, influencing investment decisions.