Navigating the IPO Landscape - The Influence of Stock Exchange Regulations on IPO Underpricing in Sweden

Abstract: The study explores the phenomenon of IPO underpricing in the Swedish market, specifically the impact of stock exchange regulations on the first-day abnormal return of IPOs. The paper analyzes data from 2018 to 2022 and compares the first-day abnormal returns of IPOs listed on regulated markets with those listed on unregulated exchanges. Contrary to previous research and the hypothesis, the findings show a positive association between regulated markets and IPO underpricing. However, the results may be influenced by the Covid-19 pandemic as a majority of observations occurred during this period of uncertainty. This implies that investors may have incentives to invest in regulated markets during times of instability, leading to higher returns on IPOs. Thus, a larger sample size with more observations before and after the pandemic is necessary to shed further light on this issue.