This paper examines the effects of substantial shareholders’ trading behaviour on share prices, trading volume and bid–ask spread in relation to the efficient market hypothesis (EMH) around the lock-up expiry for a sample of 379 Malaysian IPOs, between 2001-2011. Our analysis shows that the number of companies with substantial institutional and individual shareholders has increased after the IPO. This indicates that individual and substantial investors are optimistic about the future of the IPO companies in general. In addition, the number of existing substantial individual and institutional shareholders that sold their shares is greater than the existing substantial individual and institutional shareholders that bought shares. That is the reason why we witness an abnormal trading volume and abnormal bid–ask spread, which leads to abnormal returns. The two other categories, ‘new individual investors that came in as substantial shareholders after lock-up expiry’ and ‘new institutional investors that came in as substantial shareholders after lock-up expiry’, show that some investors are still optimistic about the future of these IPO companies. Our analysis shows an increase in trading volume before the lock-up expiry date by substantial shareholders, which is an indicator of illegal insider trading. Consequently, market makers to protect themselves would increase the spread, which results in a price drop. Significant cumulative average abnormal returns show inconsistency about the EMH. The results are vital to provide input into the enforcement of laws to regulate insider trading. This is to strengthen the legal regimen to prevent the influences of insider trading.