Performance timing - Is there a difference between PE-backed and non PE-backed IPOs?

Sammanfattning: The aim of this paper is to contribute to the current discussion on the effects of private equity ownership. We try to answer if both PE-backed IPOs and non-backed IPOs are timed to coincide with a period of unusually high operational performance. Our empirical sample consists of 118 PE-backed companies and 1,186 non-backed companies listed during 1997-2009. We compare the operational performance in the year prior to going public with the three years following the IPO to determine whether there is a decline and how this development differs between the groups. Our data supports that both groups face deteriorating growth variables while only the PE-backed subsample also show deterioration in profitability. For all operational measures that we investigate, PE-backed firms underperform non-backed firms in terms of change in operational performance post-IPO. Further, our results show that profitability declines are more apparent for PE-backed IPOs made in cold markets compared to hot while there is no difference among non-backed IPOs. This indicates that performance timing is more refined for PE-backed companies as it is used differently depending on market conditions. Finally, we are unable to tell whether the level of retained equity is an indicator of performance timing.