Is There a Negative Relationship Between the Number of Swedish IPOs and the Long-run Performance?

Abstract

We examine if there is a negative relationship between the number of Swedish IPOs and the long-run performance. In addition, we also investigate what factors that are related to long-run aftermarket performance. The IPOs in our study take place during the period 2004 to 2014 on Nasdaq OMX Stockholm and First North. Previous studies show that firms going public during high volume periods tend to underperform in the long-run. We find a positive and statistically significant relationship between the number of Swedish IPOs and the three-year long-run performance. Our results suggest that firms issuing during high volume periods yield better aftermarket performance compared to those issuing in a low volume period. These results are unexpected and contradict previous studies which have found that firms issuing during a high volume period have a lower cost of equity, reflected in lower aftermarket returns. Further research is needed to help disentangle our contradictory findings to arrive at an unambiguous conclusion, adding support for issuing firms and investors on their decision on when to go public and when to invest in an IPO on the Swedish market, respectively.