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Valuation of Swedish IPO Companies: Who Receives the Money Left on the Table?
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Business Studies.
Högskolan på Gotland, Institutionen för humaniora och samhällsvetenskap.
2011 (English)In: 2nd Annual Nordic Financial Accounting, 2011Conference paper (Refereed)
Abstract [en]

We study underpricing and equity holdings following initial public offerings (IPOs) in Sweden over the sample period 2000 through 2010. By exploiting a unique data set, with information of the ultimate holdings by institutional as well as individual investors in these firms, we make several original contributions to the existing literature related to IPOs as our data are sharper and more detailed than what have been used in prior studies. We document, as most prior studies of IPOs, that they on average are underpriced (i.e., associated with a positive initial return). IPOs with low (high) initial return have higher (lower) equity holdings by retail investors. We find that institutional investors are, to greater extent than individual investors, able to identify firms with a high initial return (i.e. receives the money left on the table). Hence, our data support the generally accepted view that institutional investors are better equipped to process information. We also confirm that the relationship between underpricing (the initial return) and offer price is U-shaped, as first reported by Fernando, Krishnamurty and Spindt (2004). Our multivariate analysis shows that individual investors have preferences for low priced IPOs whereas domestic (foreign) institutional investors have preferences for low (high) priced IPOs. Our analysis of domicile of institutional investors indicates that foreign institutional investors have preferences for holdings in IPOs characterized by a high initial return and large capitalization values. Analysis of overseas institutional holdings indicates existence of information asymmetries related to distance.


Place, publisher, year, edition, pages
Keyword [en]
IPO, Ownership structure, Sweden, Stock Market
National Category
Business Administration Social Sciences
Research subject
Business Economics (HGO)
URN: urn:nbn:se:uu:diva-197280OAI: oai:DiVA.org:uu-197280DiVA: diva2:616024
2nd Annual Nordic Financial Accounting
Doktorand företagsfinansiering
Available from: 2011-12-01 Created: 2013-03-21 Last updated: 2015-02-06

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