The performance of Nordic buyout-backed IPOs - An empirical study on first-day returns, aftermarket abnormal returns and IPO cyclicality

Abstract: Using a sample of 443 Nordic IPOs, consisting of 53 buyout-backed, 70 venture capital-backed and 320 non-sponsored issues from January 1997 to December 2010, this paper investigates the financial performance of buyout-backed IPOs listed on the Nordic stock exchanges. We compare and contrast the first-day returns and aftermarket abnormal returns over a period of three years of buyout-backed IPOs to those of non-sponsored and venture capital-backed. We employ two alternative benchmarks in the abnormal return calculations and use two abnormal return metrics to strengthen the validity of our results. Evidence is also presented for the financial performance of the IPOs depending on market condition at time of issuance. Our results indicate that buyout-backed in the Nordics experience lower average first-day returns and generally less negative abnormal returns in most periods leading up to three year aftermarket performance period than those of venture capital-backed and non-sponsored IPOs. Buyout-backed IPOs issued in high IPO activity market conditions tend to experience higher first-day returns and less negative aftermarket abnormal returns than buyout-backed IPOs issued in other periods. None of the results are statistically significant though.