Does pre-IPO investor attention affect post-IPO firm value?

Abstract: This thesis applies and extends Merton´s investor recognition model within the Swedish primary market setting using data from 2000 to 2012. Initially, we show that our measure of pre-IPO investor attention is positively correlated with post-IPO firm value by carrying out a pooled OLS and GLS regression over three calendar year endings following each company's IPO. These findings are in line with Merton's Investor Recognition Model. Yet when carrying out individual regressions of each year, the positive correlation can only be confirmed the first year ending following the IPO. However, due a timing issue of the first year observation and further reliability concerns, we view the findings as an indication that there is a positive correlation between pre-IPO investor attention and post-IPO firm value, yet we do not consider the results evidence enough of a correlation between them two. We encourage further research within this subject matter.