Private Equity-Sponsored IPOs in the Nordics: An Empirical Study of IPO Long-run Abnormal Stock Performance

Johan Thybo & Jannick Bendtner

Student thesis: Master thesis


This thesis examines whether Nordic private equity sponsored initial public offerings (IPOs) achieve superior long-run abnormal stock performance post-IPO compared to non-sponsored IPOs. We conduct an empirical analysis of a sample of 158 Nordic IPOsthat went public during the period 2005-2014. First, we group the sample into PE-backed, VC-backed, and nonsponsored IPOs and conduct a cross-sectional analysis of firm characteristics across the three IPO groups. Then, using size- and industry-adjusted benchmark groups we present the aftermarket stock performance using the measures Buy-and-Hold Abnormal Return (BHAR) and Cumulative Abnormal Returns (CAR). To calculate these abnormal returns, we propose a new method of constructing unique benchmark portfolios that lock-in the weights of delisted stocks. This method resembles the way that the IPO groups are weighted and result in less underperformance of the IPO groups. Furthermore, we examine the isolated effect of the type of IPO-sponsorship in a series of multivariate regressions with the abnormal stock performance as the dependent variable. In contrast to the reviewed literature, we have not been able to find substantial evidence of the Nordic PE-backed IPOs exhibiting superior long-run abnormal stock performance. Surprisingly, we find that the group of non-backed IPOs achieved the best long-run abnormal performance on an equally weighted basis. However, this result is not persistent to robustness checks of IPO size and leverage ratio. In the regression models, we find that the PE-backed IPOs are slightly associated with abnormal performance, however, thisrelationship is statistically insignificant. We find no signs of a relationship between VC-sponsorship and long-run abnormal stock performance in the regression models. Moreover, our study shows that the PE-backed IPOs maintain superior operating performance in the post-IPO years compared to the non-sponsored IPOs. Furthermore, we find positive first-day returns and negative long-run abnormal performance across all IPO groups.

EducationsMSc in International Business, (Graduate Programme) Final ThesisMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2018
Number of pages109