Long-run IPO performance on the Swedish equity market between 2004-2014 - Compared with Private Equity backed IPOs

Abstract

This paper investigates the long-run underperformance phenomenon of IPOs on the Swedish equity market between 2004-2014, using a sample of 53 IPO companies from Nasdaq OMX Stockholm. Also, the long-run performance of all IPOs during this time-period is compared with private equity backed IPOs separately. Our rationale for looking into this is to examine how our evidence from the Swedish market relates to previous studies within this area of research. We examine the long-run performance by calculating the abnormal returns of our companies via both buy-and-hold abnormal returns (“BHAR”) and cumulative abnormal returns (“CAR”) methods. The investigation is conducted through event time studies, using two weighting methods, where returns were evaluated after 36 months. We use a riskadjusted benchmark and control for market capitalization, book-to-market and a number of additional company specific variables. For the total IPOs, we find positive abnormal results from BHAR and CAR ranging between 8.6-12.9% suggesting Swedish IPOs overperformed in the long run. However, when investigating the private equity backed IPOs separately, our findings suggest that they underperformed during the same time period using all methods except for the value weighted BHAR.