Good investments? An investigation into the shortand long-term returns on the Swedish MTFs.

Abstract

Multilateral trading facilities (MTFs) are fairly new and rapidly growing secondary tier stock exchanges. This thesis investigate the short- and long-term stock returns for all companies which have ever listed on a Swedish MTFs. I find evidence of IPO over-pricing for companies with institutional investors as these companies present negative short-term returns. In the long run, most of the companies on these exchanges return negatively but a few companies return multiple fold. MTFs provide an important function to the financial markets in providing financing for emerging growth companies that may later transition to first tier stock exchanges. In this context, MTFs act as both bridge financing and a filter, as companies that do not grow sufficiently remain listed on the MTFs whilst the worst performers are eventually acquired or liquidated whilst the successful companies jump stock exchange.