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Sponsor Credibility and Post-IPO Performances: Evidence from Private Equity & Venture Capital backed IPOs

Lundvall, Alex LU and Danielsson Mitkas, Gabriel (2025) NEKP01 20251
Department of Economics
Abstract
As private equity (PE) and venture capital (VC) firms have become more active in taking companies public, questions around the credibility of these sponsors and their effect on post-IPO performance have grown in relevance. This study explores how different types of financial sponsors and their associated credibility influence stock returns following initial public offerings (IPOs). Using a sample of 797 IPOs recorded between 2009-01-01 and 2019-12-31 across seven European countries, we conduct multivariate OLS regressions with fixed effects to evaluate abnormal stock returns in relation to different sponsor types and their underlying credibility. Our findings show that PE-backed IPOs underperform relative to non-sponsored-backed IPOs in... (More)
As private equity (PE) and venture capital (VC) firms have become more active in taking companies public, questions around the credibility of these sponsors and their effect on post-IPO performance have grown in relevance. This study explores how different types of financial sponsors and their associated credibility influence stock returns following initial public offerings (IPOs). Using a sample of 797 IPOs recorded between 2009-01-01 and 2019-12-31 across seven European countries, we conduct multivariate OLS regressions with fixed effects to evaluate abnormal stock returns in relation to different sponsor types and their underlying credibility. Our findings show that PE-backed IPOs underperform relative to non-sponsored-backed IPOs in the short-run, whereas the long-run performance remains inconclusive. VC-backed IPOs also show signs of underperformance in both periods, although the results are statistically insignificant. No significant differences in performance is found when directly comparing PE- and VC-backed IPOs. However, when incorporating sponsor credibility, we find that higher credibility is associated with lower long-run abnormal returns among all sponsored-backed IPOs. The negative effect of credibility is less pronounced for PE sponsors in comparison to VC sponsors, but only in the short-term period. (Less)
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author
Lundvall, Alex LU and Danielsson Mitkas, Gabriel
supervisor
organization
course
NEKP01 20251
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Initial Public Offerings, Private Equity, Venture Capital, Financial Sponsor Credibility, Abnormal Returns, Multivariate Ordinary Least Squares.
language
English
id
9200869
date added to LUP
2025-09-12 11:13:43
date last changed
2025-09-12 11:13:43
@misc{9200869,
  abstract     = {{As private equity (PE) and venture capital (VC) firms have become more active in taking companies public, questions around the credibility of these sponsors and their effect on post-IPO performance have grown in relevance. This study explores how different types of financial sponsors and their associated credibility influence stock returns following initial public offerings (IPOs). Using a sample of 797 IPOs recorded between 2009-01-01 and 2019-12-31 across seven European countries, we conduct multivariate OLS regressions with fixed effects to evaluate abnormal stock returns in relation to different sponsor types and their underlying credibility. Our findings show that PE-backed IPOs underperform relative to non-sponsored-backed IPOs in the short-run, whereas the long-run performance remains inconclusive. VC-backed IPOs also show signs of underperformance in both periods, although the results are statistically insignificant. No significant differences in performance is found when directly comparing PE- and VC-backed IPOs. However, when incorporating sponsor credibility, we find that higher credibility is associated with lower long-run abnormal returns among all sponsored-backed IPOs. The negative effect of credibility is less pronounced for PE sponsors in comparison to VC sponsors, but only in the short-term period.}},
  author       = {{Lundvall, Alex and Danielsson Mitkas, Gabriel}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Sponsor Credibility and Post-IPO Performances: Evidence from Private Equity & Venture Capital backed IPOs}},
  year         = {{2025}},
}