Hot and cold - Quality of firms going public in different stages of IPO cycles
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Journal Title
Journal ISSN
Volume Title
School of Business |
Master's thesis
Author
Date
2024
Department
Major/Subject
Mcode
Degree programme
Finance
Language
en
Pages
47
Series
Abstract
This thesis studies the relation between quality of companies performing IPOs and the prevailing IPO market sentiment. This is done be comparing companies performing IPOs to all other companies within the same industry during the same year. Furthermore, IPO market sentiment is being evaluated by volumes. Quality compromises of three variables: profitability, growth and safety. In addition to quality and IPO volume analysis, the changes of quality characteristics are also studied over time. Furthermore, industry clustering of IPOs is also covered to further gain insight on characteristics of companies going public. Using OLS regressions, I find mixed results on the three components of quality assessment and the overall quality. Regarding profitability, regression model suggests positive coefficients between profitability and IPO volumes contradictory to my hypothesis. However, growth and safety are aligned with my hypothesis as there are negative coefficients with strong statistical significances. Yet, considering the overall quality, strong conclusions cannot be made, as there was not statistical significance to be found. In addition, my hypothesis of quality of companies going public improving over time can be rejected, as no statistical significance cannot be found. To summarize the finding of industry clustering analysis, I find that hot market IPOs have less industry clustering than cold market IPOs. This implies that hot markets are drawn more evenly across different industries than cold markets.Description
Thesis advisor
Keloharju, MattiKeywords
IPO, firm quality, IPO clustering, IPO sentiment
