Kauppakorkeakoulun julkaisuportaali
Aalto-yliopiston kauppakorkeakoulun gradujen tiedot nyt Aaltodocissa: Aaltodoc-julkaisuarkisto
Kauppakorkeakoulu | Rahoituksen laitos | Rahoitus | 2016
Tutkielman numero: 14347
The long-run performance of PE and VC backed IPOs - Evidence from the Nordic and German markets
Tekijä: Lammi, Juho
Otsikko: The long-run performance of PE and VC backed IPOs - Evidence from the Nordic and German markets
Vuosi: 2016  Kieli: eng
Laitos: Rahoituksen laitos
Aine: Rahoitus
Asiasanat: rahoitus; financing; listautuminen; listed companies; sijoittajat; investors; pääoma; capital; osakkeet; shares; Pohjoismaat; Scandinavia; Saksa; Germany
Sivumäärä: 73
» hse_ethesis_14347.pdf pdf  koko: 986 KB (1009145)
Avainsanat: private equity; venture capital; financial sponsors; initial public offerings; IPO performance; share price performance

The purpose of this paper is to investigate the long-run value creation of financial sponsors through aftermarket performance of sponsor backed initial public offerings in Nordic countries as well as in Germany. More specifically, the aim is to find aftermarket performance differences within the sponsor backed and non-sponsor backed IPO groups. Finally, this study focuses on analyzing the long-run performance drivers of different IPO groups.


The final sample consists of 235 Nordic and 270 German IPOs issued between 2000 and 2011. In the Nordic countries, sponsor backed IPOs represent 27% of the total volume (50 IPOs). Out of the 50 Nordic sponsor backed IPOs, 29 are venture capital backed and 21 are private equity backed. In Germany, the share of sponsor backed IPOs is roughly 19% of the total number (43 IPOs) out of which 24 are VC-backed and 19 are PE-backed. My analysis is primarily based on comparing the buy-and-hold abnormal returns (BHARs) of sponsor backed and non-sponsor backed initial public offerings. The BHARs are generated by compounding monthly returns of a specific time-frame in addition to the first partial month following the first day of listing. Furthermore, OLS regressions are used in analyzing the drivers behind long-run aftermarket performance between private equity, venture capital and non-sponsor backed IPOs.


I find that Nordic and German IPOs experience a significant 36-month underperformance compared to the equity market indexes. The pattern holds when IPOs are matched with firms according to their size and industry. Furthermore, the results show that sponsor-backed initial public offerings outperform their non-sponsor backed counterparts significantly, but both groups are unable to generate positive abnormal returns. The better performance of sponsor backed IPOs compared to non-sponsor backed is driven by the long-run returns of private equity backed initial public offerings with abnormal returns close, but insignificantly differing from zero. All in all, the results show that compared to the non-sponsor backed initial public offerings, PE and VC owners, as a whole, are able to create value in the long-run. In addition to the sponsor backed IPOs being initially less underpriced, the source of the value creation is related to better operational efficiency, which is in line with Jensen's (1986) PE value creation model.
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