Cross-Market Analysis of Post-IPO and SEO Long-Term Performance: Unraveling the Impacts of Market Capitalization and Timing in Swedish and American Equity Markets
(2024) NEKN02 20241Department of Economics
- Abstract
- This study examines the long-term abnormal returns of stocks following Initial Public Offerings (IPOs) and Seasoned Equity Offerings (SEOs) on the Swedish and American markets from January 2000 to March 2021. Additionally, it examines the differences between Swedish and American companies and investigates factors influencing these disparities, focusing on the importance of market capitalization at the time of the equity offer and the timing of the offering. Using macroeconomic and entity-level variables such as Market Cap at Offer, Debt-to-equity, Profit Margin, Interest Rate, Trade Volume, Industry, Volatility Index, Clusterings, and Consumer Sentiment indices, the study aims to provide detailed insights into the Swedish and American... (More)
- This study examines the long-term abnormal returns of stocks following Initial Public Offerings (IPOs) and Seasoned Equity Offerings (SEOs) on the Swedish and American markets from January 2000 to March 2021. Additionally, it examines the differences between Swedish and American companies and investigates factors influencing these disparities, focusing on the importance of market capitalization at the time of the equity offer and the timing of the offering. Using macroeconomic and entity-level variables such as Market Cap at Offer, Debt-to-equity, Profit Margin, Interest Rate, Trade Volume, Industry, Volatility Index, Clusterings, and Consumer Sentiment indices, the study aims to provide detailed insights into the Swedish and American markets.
The findings reveal significant regional differences and confirm the underperformance phenomenon, particularly highlighting that Swedish IPOs and SEOs consistently underperform over three years, with the exception of SEOs in the first year. American markets also show consistent underperformance, but it becomes statistically significant only in the third year for IPOs and from the second year onwards for SEOs. Key variables affecting IPOs include the interest rate, VIX, and debt-to-equity ratio. For SEOs, these variables are similarly important, with profit margin replacing the VIX as a key factor. The study also highlights the impact of market capitalization on long-term performance, particularly for IPOs in Sweden across all years and in the three-year period for U.S. IPOs. Still, the results do not show any significant effect of the market cap on SEOs. While the size of a corporation appears to impact IPOs, the only significant differences between the subset groups are observed between small- and mid-caps, with no significant differences between small- and large-caps. The reasoning behind this could be the low number of large-cap IPO observations, resulting in insignificant test results. This research contributes to a deeper understanding of IPO and SEO dynamics, offering valuable insights for investors and policymakers navigating these complex markets. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9162566
- author
- Sörensson, Gustav LU and Nilsson, Daniel
- supervisor
- organization
- course
- NEKN02 20241
- year
- 2024
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Initial Public Offerings (IPOs), Seasoned Equity Offerings (SEOs), Market Capitalization, Equity Offering Timing, Abnormal Returns, Long-term Performance, Underperformance Phenomenon
- language
- English
- id
- 9162566
- date added to LUP
- 2024-08-12 15:58:33
- date last changed
- 2024-08-12 15:58:33
@misc{9162566,
abstract = {{This study examines the long-term abnormal returns of stocks following Initial Public Offerings (IPOs) and Seasoned Equity Offerings (SEOs) on the Swedish and American markets from January 2000 to March 2021. Additionally, it examines the differences between Swedish and American companies and investigates factors influencing these disparities, focusing on the importance of market capitalization at the time of the equity offer and the timing of the offering. Using macroeconomic and entity-level variables such as Market Cap at Offer, Debt-to-equity, Profit Margin, Interest Rate, Trade Volume, Industry, Volatility Index, Clusterings, and Consumer Sentiment indices, the study aims to provide detailed insights into the Swedish and American markets.
The findings reveal significant regional differences and confirm the underperformance phenomenon, particularly highlighting that Swedish IPOs and SEOs consistently underperform over three years, with the exception of SEOs in the first year. American markets also show consistent underperformance, but it becomes statistically significant only in the third year for IPOs and from the second year onwards for SEOs. Key variables affecting IPOs include the interest rate, VIX, and debt-to-equity ratio. For SEOs, these variables are similarly important, with profit margin replacing the VIX as a key factor. The study also highlights the impact of market capitalization on long-term performance, particularly for IPOs in Sweden across all years and in the three-year period for U.S. IPOs. Still, the results do not show any significant effect of the market cap on SEOs. While the size of a corporation appears to impact IPOs, the only significant differences between the subset groups are observed between small- and mid-caps, with no significant differences between small- and large-caps. The reasoning behind this could be the low number of large-cap IPO observations, resulting in insignificant test results. This research contributes to a deeper understanding of IPO and SEO dynamics, offering valuable insights for investors and policymakers navigating these complex markets.}},
author = {{Sörensson, Gustav and Nilsson, Daniel}},
language = {{eng}},
note = {{Student Paper}},
title = {{Cross-Market Analysis of Post-IPO and SEO Long-Term Performance: Unraveling the Impacts of Market Capitalization and Timing in Swedish and American Equity Markets}},
year = {{2024}},
}