| Summary: | This paper examines the market reaction and regulatory change at the expiration of 292 Malaysian initial public offerings (IPOs) during the period of 2003-2012 involving two lockup regimes. IPO lockup in Malaysia is mandatory as opposed to voluntary where it is negotiated between IPO firm and its underwriter. Using the market model and market adjusted return model of event study method, the result shows a significant negative abnormal return at the expiration of the lockup period. Hence, the study provides evidence of contradicting the semistrong form of the Efficient Market Hypothesis (EMH). According to EMH, the expiration of the lockup period which is public knowledge should not be accompanied with a significant abnormal return. Furthermore, the study also shows the existence of higher abnormal trading volume at lockup expiry. The change in lockup regime however, does not have an impact in reducing the negative abnormal returns at lockup expiry
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