Initial Public Offerings in Sweden: the Effect on Employment and Corporate Performance

Abstract: This paper investigates the effect of Initial Public Offerings (IPOs) on employment and operating performance of Swedish firms. In order to capture the true effect of IPOs we match firms that underwent an IPO with similar firms that opted to remain private. This approach allows us to correct for firm and industry characteristics and general economic trends. By means of a difference-in-difference regression we find that IPO firms that undergo an IPO on average grow substantially faster than their private peers in the IPO year and the years following the IPO. We measure growth as an increase in number of employees, net sales, and total assets. We also find this excess growth does not translate into an excess increase in profitability, as measured by return on assets, nor do we find a significant change in financial leverage for the sample as a whole. We perform additional triple difference regressions to test whether the IPO year, age of the firm, and exchange venue impact post-IPO performance. Apart from the year of listing exhibiting an effect on leverage, we find no conclusive evidence to substantiate the effect of the other factors. Our study highlights the importance of well-functioning public markets and IPOs for the overall economic development of Sweden.