“The Performance of Private Equity and non-Private Equity Backed Initial Public Offerings”: A Study of Underpricing and Long-Run Stock Performance on the European Stock Exchanges

The analysis shows that underpricing exists on the European market during 1999-2010 and that PE backed firms usually experience a lower underpricing than non-PE backed companies. Maturity, earnings management and company size are variables explaining underpricing for PE firms. For non-PE backed IPOs, earnings management is the only statistically significant variable explaining the underpricing. In the sample used, there is no difference in long-run stock performance between PE and non-PE backed firms. However, different variables explain the long-run stock performance depending on the firm being PE and non-PE backed. Operating margin affects the long-run stock performance for PE backed IPOs, while company size explains the long-run performance for non-PE backed firms. In addition, the underpricing size does not affect long-run stock performance