The Economic Cycle’s Effect on IPOs

Sammanfattning: Title: The Economic Cycle’s Effect on IPOs Seminar date: 2016-06-02 Course: BUSN89 Degree Project in Corporate and Financial Management – Master Level, 15 ECTS Authors: Niklas Lindh and Viktor Pennsäter Supervisor: Håkan Jankensgård Key words: IPO, initial public offering, economic cycle, market timing and IPO waves. Purpose: Investigate how the economic cycle influences IPO initial return and long-run performance. Theoretical perspective: Previous research and theories is used, including asymmetric information hypothesis, signaling theory, impresario hypothesis, divergence of opinion hypothesis, window-dressing hypothesis, window of opportunity hypothesis and the spillover effect. Methodology: An event study is conducted to identify abnormal returns. First day return and a long-run performance over 36 months are then used as dependent variables in several regressions. The economic cycle is an independent variable, complemented by other variables focusing on operating performance. Empirical foundation: 162 IPOs from the stock exchanges Nasdaq OMX Stockholm and Aktietorget are studied from the time period 2001-07-01 to 2012-12-31. Conclusion: Economic cycles cannot explain any differences in initial return and long-run performance.