Backing winners or hyping losers? A study on Venture Capital-backed IPOs and long term success in the Nordic stock markets

Abstract

This thesis investigates the long-term performance of venture capital (VC)-backed initial public offerings (IPOs) in the Nordic market. While prior research has focused primarily on short-term IPO outcomes in the U.S., this study contributes by examining post-IPO success in Sweden, Norway, Finland, and Denmark.

Using a sample of 443 IPOs from 2010 to 2022, we apply buy-and-hold abnormal returns (BHAR), ordinary least squares (OLS) regression, and descriptive statistics to assess stock performance up to two years after listing. In addition to industry and year fixed effects, our final model includes firm-specific controls such as first-day return and lock-up expiration return to isolate the long-term effect of VC involvement.

The results show that VC-backed firms consistently outperform non-backed firms in terms of long-term stock returns. These findings support the certification and signaling theories, indicating that VC participation acts as a credible signal of firm quality and reduces information asymmetry. Contrary to the overvaluation hypothesis, no evidence of post-IPO value correction is found.

This study highlights the role of venture capital in enhancing long-term stock market outcomes and suggests directions for future research on operational performance and firm survival.