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Swedish Private Equity – A Reliable Source for IPO Pricing?

Brown, Johan LU ; Nilsson, Patrik LU and Wallersköld, Filip LU (2020) FEKH89 20201
Department of Business Administration
Abstract
Title: Swedish Private Equity - A Reliable Source for IPO Pricing?

Seminar date: 03/05/2020

Course: FEKH89, Bachelor Degree Project in Financial Management Undergraduate Level, 15 credits

Authors: Johan Brown, Patrik Nilsson, Filip Wallersköld

Supervisor: Anamaria Cociorva

Key words: Underpricing, Information Asymmetry, Private Equity, IPO, Sweden

Purpose: To explore if and why Private Equity-backed companies experience different levels of underpricing compared to its counterpart between 2009 and 2018

Methodology: Quantitative Research

Theoretical approach: Previous research suggests that firms going public experience, on average, abnormal first day returns. One of the theories explaining this phenomena argues that... (More)
Title: Swedish Private Equity - A Reliable Source for IPO Pricing?

Seminar date: 03/05/2020

Course: FEKH89, Bachelor Degree Project in Financial Management Undergraduate Level, 15 credits

Authors: Johan Brown, Patrik Nilsson, Filip Wallersköld

Supervisor: Anamaria Cociorva

Key words: Underpricing, Information Asymmetry, Private Equity, IPO, Sweden

Purpose: To explore if and why Private Equity-backed companies experience different levels of underpricing compared to its counterpart between 2009 and 2018

Methodology: Quantitative Research

Theoretical approach: Previous research suggests that firms going public experience, on average, abnormal first day returns. One of the theories explaining this phenomena argues that underpricing is a result of informational asymmetry between investors. However, certain procedures can be made in order to lower this informational gap. Hence, this study examines whether private equity lowers informational asymmetry by comparing a sample containing private equity-backed firms with a sample containing non-private equity-backed firms in Sweden during 2009-2018.

Empirical approach: 277 IPOs in Sweden between 2009-2018 were studied. 83 of the companies studied were backed by private equity and the remaining 194 companies were not backed by private equity. The data was collected from Bloomberg.

Conclusion: The study concludes that private equity backed firms experience less underpricing compared to non-private equity-backed firms due to the certification effect private equity provides. The variables debt-to-capital ratio, market capitalization and IPO Year proved significant results in explaining underpricing for non-private equity-backed firms. The decision for a private equity firm to sell off their shares, “exiting”, in connection to IPOs was the most prominent variable explaining underpricing for private equity-backed firms. (Less)
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author
Brown, Johan LU ; Nilsson, Patrik LU and Wallersköld, Filip LU
supervisor
organization
course
FEKH89 20201
year
type
M2 - Bachelor Degree
subject
keywords
Key words: Underpricing, Information Asymmetry, Private Equity, IPO, Sweden
language
English
id
9025020
date added to LUP
2020-08-05 12:44:43
date last changed
2020-08-05 12:44:43
@misc{9025020,
  abstract     = {Title: Swedish Private Equity - A Reliable Source for IPO Pricing?

Seminar date: 03/05/2020

Course: FEKH89, Bachelor Degree Project in Financial Management Undergraduate Level, 15 credits

Authors: Johan Brown, Patrik Nilsson, Filip Wallersköld

Supervisor: Anamaria Cociorva

Key words: Underpricing, Information Asymmetry, Private Equity, IPO, Sweden

Purpose: To explore if and why Private Equity-backed companies experience different levels of underpricing compared to its counterpart between 2009 and 2018

Methodology: Quantitative Research

Theoretical approach: Previous research suggests that firms going public experience, on average, abnormal first day returns. One of the theories explaining this phenomena argues that underpricing is a result of informational asymmetry between investors. However, certain procedures can be made in order to lower this informational gap. Hence, this study examines whether private equity lowers informational asymmetry by comparing a sample containing private equity-backed firms with a sample containing non-private equity-backed firms in Sweden during 2009-2018.

Empirical approach: 277 IPOs in Sweden between 2009-2018 were studied. 83 of the companies studied were backed by private equity and the remaining 194 companies were not backed by private equity. The data was collected from Bloomberg.

Conclusion: The study concludes that private equity backed firms experience less underpricing compared to non-private equity-backed firms due to the certification effect private equity provides. The variables debt-to-capital ratio, market capitalization and IPO Year proved significant results in explaining underpricing for non-private equity-backed firms. The decision for a private equity firm to sell off their shares, “exiting”, in connection to IPOs was the most prominent variable explaining underpricing for private equity-backed firms.},
  author       = {Brown, Johan and Nilsson, Patrik and Wallersköld, Filip},
  keyword      = {Key words: Underpricing,Information Asymmetry,Private Equity,IPO,Sweden},
  language     = {eng},
  note         = {Student Paper},
  title        = {Swedish Private Equity – A Reliable Source for IPO Pricing?},
  year         = {2020},
}