Can First Day Returns of Initial Public Offerings be Explained by Individual Financial Ratios?

Sammanfattning: This thesis studies the relationship between historical financial ratios and first day returns of initial public offerings (IPOs). The empirical data is based on 49 IPOs that were made on the Stockholm OMX Stock Exchange during the period 2000 to 2008. The point of departure was to explore the ramifications of less favourable financial ratios and their impact on first day returns. The study has been based on theories of asymmetric information as a foundation to investigate how financial ratios possibly could bridge information uncertainties and affect the ex ante uncertainty when investing in an IPO. This has been examined through a large set of financial ratios. At a first stage the number of ratios has been reduced using a factor analysis and the remaining ratios were thereafter included in a multiple regression. The study concludes that no statistically significant relationship could be found between the financial ratios and first day returns in the studied sample.