Factors Affecting Long-Term Performance of IPO Stocks in Finland and Sweden
Bergström, Emil (2020)
2020
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Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2020112524349
https://urn.fi/URN:NBN:fi:amk-2020112524349
Tiivistelmä
Initial public offerings (IPOs) have become more frequent after the 2008 financial crisis in both Finland and Sweden, though far more so in Sweden. IPO stocks generally show an up-tick in price during the initial day of trading regardless of the listing exchange. Despite this it has been globally established that most IPO stocks end up-underperforming their re-spective market in the long-term prior to the financial crisis.
The aim of this thesis is to investigate whether long-term underperformance is still present in Finnish and Swedish SME IPOs that listed after the financial crisis. The second objective is to explore whether performance can be predicted by a set of attributes at the time of list-ing. The attributes chosen as indicators are company age, IPO gross proceeds, industry, total assets, assets to equity ratio, gross profit margin and earnings before interest, taxes, depreciation, and amortization (EBITDA) margin.
A total of 38 companies were selected
The thesis opens with brief background into prior studies on the topic. This is followed by a theory portion where first the advantages and disadvantages of going public are presented. Then the thesis delves deeper into the leading hypotheses for long-term performance and efficient market theory. Financial statement theory is also presented, as it relates to the se-lected performance variables.
In the results, performance is evaluated with the metric buy-and-hold abnormal returns (BHARs) approach. The effect of the chosen indicators on BHARs are studied through a multi-variable regression analysis model. The efficacy of the model is also discussed.
The datasets used indicate First North IPOs over-performance in Finland and under-perfor-mance in Sweden in the long term. The variable EBITDA margin can used to predict BHARs in Finland after 12 months. However, the other variables proved statistically insig-nificant. Indicating that that one theory is not sufficient to explain performance and that a myriad of variables affect stock performance.
The aim of this thesis is to investigate whether long-term underperformance is still present in Finnish and Swedish SME IPOs that listed after the financial crisis. The second objective is to explore whether performance can be predicted by a set of attributes at the time of list-ing. The attributes chosen as indicators are company age, IPO gross proceeds, industry, total assets, assets to equity ratio, gross profit margin and earnings before interest, taxes, depreciation, and amortization (EBITDA) margin.
A total of 38 companies were selected
The thesis opens with brief background into prior studies on the topic. This is followed by a theory portion where first the advantages and disadvantages of going public are presented. Then the thesis delves deeper into the leading hypotheses for long-term performance and efficient market theory. Financial statement theory is also presented, as it relates to the se-lected performance variables.
In the results, performance is evaluated with the metric buy-and-hold abnormal returns (BHARs) approach. The effect of the chosen indicators on BHARs are studied through a multi-variable regression analysis model. The efficacy of the model is also discussed.
The datasets used indicate First North IPOs over-performance in Finland and under-perfor-mance in Sweden in the long term. The variable EBITDA margin can used to predict BHARs in Finland after 12 months. However, the other variables proved statistically insig-nificant. Indicating that that one theory is not sufficient to explain performance and that a myriad of variables affect stock performance.