The paper "The Role of Lockups in Stock Mergers" by Associate Professor Liu Yi and her collaborators has been officially published in the top journal in the field of economic management, Management Science. The journal Management Science was founded in 1954 and is sponsored by the American Society for Operations Research and Management. It is a top tier journal with a long history and high reputation in the field of economic management, and is widely included in various international top journal catalogs such as UTD24, FT50, and ABS (4 *). Its impact factor in 2023 is 4.6, and its impact factor in the past five years is 6.1.

Paper Abstract

We document the frequent use of stock lockup agreements in mergers and acquisitions (M&As) paid in stock and examine the corporate determinants and consequences of the use and duration of lockups. Lockup agreements prohibit target shareholders from selling shares issued by the acquirer as a means of payment for a prespecified period. We find support for the hypothesis that target shareholders agree to lockups to precommit to hold on to the acquirer’s stock if they believe the merger’s long-term fundamentals are strong. Consistent with our hypothesis, lockups come with larger acquirer announcement returns, particularly when acquirer valuations are high; ex ante, lockup adoption likelihood increases with acquirers’ valuation. Lockups also come with higher deal completion likelihood, shorter merger negotiations, and higher long-term operating performance. We conclude the market interprets lockups as a signal of strong fundamentals, particularly when acquirers’ valuations are high.