The long-run performance of PE and VC backed IPOs - Evidence from the Nordic and German markets

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dc.contributor Aalto-yliopisto fi
dc.contributor Aalto University en
dc.contributor.author Lammi, Juho
dc.date.accessioned 2016-06-14T06:01:01Z
dc.date.available 2016-06-14T06:01:01Z
dc.date.issued 2016
dc.identifier.uri https://aaltodoc.aalto.fi/handle/123456789/20672
dc.description.abstract OBJECTIVES OF THE STUDY 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. DATA AND METHODOLOGY 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. FINDINGS OF THE STUDY 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. en
dc.format.extent 73
dc.format.mimetype application/pdf en
dc.language.iso en en
dc.title The long-run performance of PE and VC backed IPOs - Evidence from the Nordic and German markets en
dc.type G2 Pro gradu, diplomityö fi
dc.contributor.school Kauppakorkeakoulu fi
dc.contributor.school School of Business en
dc.contributor.department Rahoituksen laitos fi
dc.contributor.department Department of Finance en
dc.subject.keyword private equity
dc.subject.keyword venture capital
dc.subject.keyword financial sponsors
dc.subject.keyword initial public offerings
dc.subject.keyword IPO performance
dc.subject.keyword share price performance
dc.identifier.urn URN:NBN:fi:aalto-201609083382
dc.type.dcmitype text en
dc.programme.major Rahoitus fi
dc.programme.major Finance en
dc.type.ontasot Pro gradu tutkielma fi
dc.type.ontasot Master's thesis en
dc.subject.helecon rahoitus
dc.subject.helecon financing
dc.subject.helecon listautuminen
dc.subject.helecon listed companies
dc.subject.helecon sijoittajat
dc.subject.helecon investors
dc.subject.helecon pääoma
dc.subject.helecon capital
dc.subject.helecon osakkeet
dc.subject.helecon shares
dc.subject.helecon Pohjoismaat
dc.subject.helecon Scandinavia
dc.subject.helecon Saksa
dc.subject.helecon Germany
dc.ethesisid 14347
dc.date.dateaccepted 2016-03-07
dc.location P1 I


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