Shareholder lock-in contracts: Share price and trading volume effects at the lock-in expiry

This paper unveils the diversity in lock-in agreements of firms listed on the Nouveau Marche stock exchange in France. We give the main economic reasons why shareholders adopt lock-in agreements that are more stringent than legally required. We relate the abnormal returns and the abnormal volume at the expiry dates of the different types of lock-in contracts to the degree of underpricing, venture-capitalist reputation and underwriter reputation. Abnormal returns and trading volume increase at the lock-in expiry; this is especially pronounced at the expiry dates of insider lock-in contracts as insiders are legally required to be locked-in. We do not find significant abnormal returns at the expiries of VC contracts, even though trading volume increases at their lock-in expiry. There is also no evidence of a positive (negative) relation between abnormal returns (abnormal volume) and more stringent lock-in contracts. Lock-in contracts and the degree of underpricing are complementary signaling devices.