Even though private equity has been a widespread phenomenon since the beginning of the 1970s, only a limited number of studies have been published in relation to how PE-backed IPOs perform. In addition, even fewer studies try to explain potential differences in performance between PEbacked and non-PE-backed IPOs. This thesis analyses the long-term performance of PE-backed IPOs through a sample of IPOs made on the German and British markets during the period 2000-2014. The long-term performance is analysed by the use of different methods where different benchmarks are in focus. Further, the thesis chooses to use a broad corporate governance perspective to try to explain the differences between PE-backed and non-PE-backed IPOs with select factors, which are expected to have a positive effect on the abnormal return.
This study supports the current literatures’ empirical findings within the area of IPOs’ long-term performance. In general, the study finds that IPOs have a negative abnormal return in relation to a general market index, which indicates that the average German and British IPO underperforms after the first 3 years of listing. There is however a difference in performance when PE-backed IPOs and non-PE-backed IPOs are compared. Overall, the study finds statistical evidence for PEbacked IPOs performing better than non-PE-backed. In addition, the study partly identifies a positive relation between CEO incentives and the long-term performance on the British market, though this relation is not identified on the German market. Further, the study finds no statistical evidence for a positive relation between long-term performance and the two other select corporate governance variables, degree of leverage and size of the largest block holder. As a result, the study concludes that governance can only mildly explain the difference in performance between the two groups.
|Educations||MSc in Finance and Accounting, (Graduate Programme) Final Thesis|
|Number of pages||129|