Determining Factors for a Successful IPO on Growth Markets: Evidence From Denmark and Sweden

Abstract

This study examines the determining factors for a “successful” IPO by carefully selecting a range of variables related to corporate governance and financial metrics. The research investigates whether there is a relationship between these selected factors and a company's performance in both the shortterm (underpricing) and long-term. The study is conducted on 201 companies that went public on either Nasdaq First North or Spotlight Stock Market between 2015 and 2021. Eight hypotheses related to underpricing and eight hypotheses related to long-term performance were tested using an OLS regression analysis. The analysis found two significant relationships related to underpricing: 1) board size has a negative effect, and 2) profitability and liquidity have a positive effect, contrary to expectations. Furthermore, the study identified five determining factors for long-term performance: 1) The board's financial incentive have a negative effect, contrary to expectations. 2) Age has a positive or negative effect depending on the variable, 3) education type has both a positive and negative effect, 4) board size has a negative effect, and 5) profitability and liquidity have a positive effect except for EBIT margin, which has a negative effect. The study found that there are still significant portions of underpricing and abnormal long-term performance that cannot be explained by the variables included in this study.