Long-Run Performance Trends of Private Equity-Backed IPOs: Evidence from the Nordics
Sammanfattning: This study examines the long-run performance, measured as the 36-month buy-and-hold abnormal return, of private equity-backed initial public offerings (IPOs), and compares it to the long-run performance of non-backed IPOs. Using a sample of 130 IPOs listed on the four main exchanges in the Nordics from October 2006 to December 2016, we first show that private equity-backed IPOs, on average, are larger, use more leverage, and have higher asset turnover than non-backed IPOs. Then, we empirically confirm that private equity-backed IPOs experience significantly better long-run performance than non-backed IPOs. These results remain robust using both parametric and non-parametric tests. Finally, using a cross-sectional regression, we show that long-run performance is positively correlated with market capitalization, leverage, and asset turnover respectively. In conclusion, we find that the superior performance of private equity-backed IPOs is related to the fact that these IPOs are larger, more leveraged, and have better operating performance compared to non-backed IPOs.
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