Long-term IPO performance on the Swedish stock market : An event study on Swedish Initial Public Offerings

Abstract: Context The number of Initial Public Offerings on the Swedish market has increasedrapidly over the last decade, reporting over 100 IPOs only in 2021. Although theincrease has been extraordinary, the majority of the IPO performance researchhas been conducted on larger markets such as the US, Germany, and China. Thiscreates a gap in the research regarding the performance of IPOs on the fastgrowing Swedish stock market.  Purpose The purpose of this thesis is to fill the identified research gap and examine howthe Swedish IPOs perform in relation to established firms listed on the OMXSSmall Cap. Findings on long-term over-or underperformance would lay afoundation for potential investment strategies as well as show signs ofinformation asymmetry and mispricing. To further extend the use of ourfindings, firm-specific factors will be tested in a regression model to find ifspecific firm characteristics have a positive or negative impact on the long-termperformance of the IPOs.  Questions at issue 1. Does the Swedish Initial Public Offerings over/underperform comparedto the OMXS Small Cap in the long run? 2. Which firm-specific factors affect the long-term performance of an IPO? Methodology To find if the IPOs over-or underperform the OMXS Small Cap index, the Buyand Hold Abnormal Returns over 24 and 36 months are calculated with theOMXS Small Cap as a benchmark index. Further, a regression analysis with 15explanatory variables is performed with the received BHAR results as thedependent variable to find if there are any significant relationships between thefirm-specific variables measured before the IPO and the long-term performance.  Results The Buy and Hold Abnormal Returns presented a positive abnormal return forboth periods measured, with a significant overperformance of 9,91% over the36-month period, and 21,14% for the 24-month period. Further, the regressionanalysis showed a positive relationship between firm performance and firm sizeand Return On Equity, indicating that a high ROE, as well as a larger firm sizeat the date of the listing, increases the chances of higher long-term returns.