Regulatory Promoter Lock-in Reforms and IPO Underpricing: Evidence from the Indian Primary Market

IPO Underpricing; Lock-in Reforms; Promoter Holding; Signaling Theory; Agency Theory; SEBI Regulation.

This study examines the impact of promoter lock-in reforms on IPO underpricing in the Indian primary market, focusing on information asymmetry and ownership structure. Using a cross-sectional sample of 364 IPOs following the 2021 SEBI reform, the study applies OLS regression with interaction effects. The findings reveal that lock-in reforms do not have a statistically significant effect on IPO underpricing, and their impact does not vary with information asymmetry or promoter holding. In contrast, firm size emerges as a significant determinant, with larger firms experiencing lower underpricing, supporting the information asymmetry perspective. The results suggest that IPO pricing in India is driven more by firm-specific fundamentals and market dynamics than by regulatory lock-in provisions. This study contributes to the literature by offering early empirical evidence on regulatory lock-in reforms in an emerging market context.