The Impact of Interest Rates on Long-Term IPO Performance: An Empirical Study of the Swedish Market

Abstract

This thesis examines how the interest rate, at the offering date, affects the long term performance of Initial Public Offering. We focus on IPOs in Sweden from 2008 to 2022, analyzing a dataset of 269 listings. Using both cumulative and time-weighted return approaches, we examine the link between monetary policy and returns over three years. The analysis points to a clear non-linear pattern: IPOs launched when interest rates were high tend to perform worse than those introduced during periods of lower rates. The non-linear and downward sloping pattern, suggests that timing in relation to interest rates matters more than often assumed. Our findings imply that investors may not fully take monetary conditions into account when pricing IPOs, which challenges the idea of fully efficient markets. These insights may be valuable to those investing in or planning IPOs, as well as to policymakers interested in how monetary policy affects new listings.