The impact of certification on the reduction of information asymmetry, during and post-IPO

Abstract: Purpose: The purpose of this study is to investigate the existence of information asymmetry displayed in the initial return, and post-IPO financing. Additionally, how sponsor certification influences IPOs and in the post-IPO financing as a means to reduce information asymmetry. Methodology: The study was conducted based on a quantitative research method, followed by a deductive approach, which includes the collection and evaluation of secondary data and testing the hypothesis that emerges from it. Theoretical perspective: Research studies and theories regarding the information asymmetry, initial returns and the impact of sponsor certification during and post-IPO financing are presented in the theoretical framework section. Empirical foundation: The empirical material has been collected from the Bloomberg database which consisted of 222 IPOs conducted between 2010-2019 in the Swedish financial market. The data has been filtered out for; offer size, offer price, firm age, industry, debt to equity ratio, net change in equity, Venture Capital backed, Private equity backed. Conclusion: The study indicates that asymmetric information influences the initial return of the IPO and the post-IPO financing decisions. Also there is a positive relationship between PE funds and initial return, which is a contradictory outcome to former research. Moreover, there is a positive significant relationship of PE sponsorship to the net change in equity. Extended discussion about the conclusions will be conducted in the following sections.