Determining Factors in the Post-issue Performance of IPOs: An Empirical Study of the Nordic and UK Markets in the Period of 2000-2017

David Sebastian Ingman & Oscar Malte Agner

Student thesis: Master thesis


This paper aims to investigate the post-issue performance of IPOs and its determining factors, using a sample of IPOs conducted in the Nordic and UK markets for the time period of 1 January 2000 to 31 December 2017. The structure follows that of an empirical study with a comparative approach, where the primary focus is the long-term phenomenon of underperformance with a complementary analysis of the phenomenon of short-term underpricing, as well as an investigation of any industry-specific differences. In addition to establishing the existence of these phenomena, this paper examines whether a number of firm-specific characteristics have a determining effect on the long-term performance, specifically sponsorbacking by private equity and venture capital, the presence of cornerstone investors and the degree to which firms use leverage in their capital structure. The empirical findings show that both short-term underpricing and long-term underperformance were indeed present in the aggregated Nordic and UK markets during the investigated time period. Furthermore, it is found that determining factors for long-term underperformance are backing by private equity firms in the UK market and the presence of cornerstone investors in the Nordic markets. These findings suggest that investors, on average, can expect to earn a positive first-day return, and reversely a negative risk-adjusted return in the long-term, from investing in IPOs in these markets. Moreover, the findings imply that by investing only in IPOs backed by private equity firms in the UK market, and investing only in IPOs with commitment from cornerstone investors in the Nordic markets, one can, on average, expect to earn greater risk-adjusted returns compared to investing in every IPO. In terms of the geographical comparison, the findings are inconclusive and it can therefore not be said that one market is more efficient than the other, but it is shown that significant differences do exist between the Nordic and the UK markets.

EducationsMSc in Finance and Investments, (Graduate Programme) Final Thesis
Publication date2018
Number of pages138