As firms’ scale becomes enlarged, they seek ways to gain more investments. Initial public offering (IPO) can be a way to achieve this purpose. It is a great chance for companies that especially have insufficient capital because these firms can rapidly raise financial resources by issuing new shares. Before going public, the company should disclose their intended use of proceeds in their IPO prospectus according to Securities and Exchange Commission (SEC) regulations. The level of disclosure of information about the use of proceeds is up to issuer’s decision. This level of disclosure is helpful for new venture to reduce information asymmetry between insiders and outsiders. While previous studies have been focused on ‘proceeds’ itself or ‘disclosure’ of use of proceeds, it is hard to find the effect of intended use of proceeds according to its relevant usage. Focusing on this point, this study will investigate whether new ventures really use the proceeds an intended. In addition, we do not focus on financial performance but managerial performance such as firm innovation. In particular, early stage of investment at the of IPO can be a good source of competitive advantage because firms can access more chances to produce superior absorptive capacity of R&D (Nelson and Winter, 1982; Dierickx and Cool, 1989; Lieberman, 1989; Cohen and Levinthal, 1990; Kor, 2006). With this in mind, this study attempts to investigate the relationship between intended use of proceeds and firm innovation.

We also contribute literatures by looking at moderating effect of lockup expirations. We assume that lockup period act as a signal of firm for potential investors. A more detailed discussion will be continued below.