Initial Public Offerings in “Hot” and “Cold” Markets - A Study of the Swedish IPO market

Abstract

This thesis aims to test if the IPO market differs in hot and cold market conditions in terms of industry clustering, firm characteristics, and long-run performance. The study is conducted on the Swedish IPO market ranging from 1992 to 2020 and 2017 in analyzing the long-run performance. The study compares different variables across the period depending on the market condition. The long-run performance is measured by taking the risk-adjusted returns over three years. The results from the study support that there are differences in some of the firm characteristics in different market conditions and a slight difference in industry clustering. Hot market firms tend to have a higher percentage of institutional owners and overallotment by underwriters. One of the industries that are analyzed differs in long-run performance. However, the study rejects any difference in risk-adjusted long-run performance depending on the market conditions. Regressing firm characteristics and market conditions on returns performance we find no significant difference between conditions or effects of firm characteristics.