Market Performance of Sponsor-Backed Initial Public Offerings: An Empirical Analysis of the German Market

Abstract

This paper investigates the overall market performance of Initial Public Offerings (IPOs) in Germany, by analyzing the short and long run performance of IPOs, utilizing the data from 2000-2013. Furthermore the study aims to distinguish and compare the performance of sponsor backed IPOs to non-sponsor backed IPOs, by placing a special focus on the value creating abilities of financial sponsors. The examined data set consists of 286 IPOs out of which 46 can be considered as IPOs which were backed by financial sponsor. The study suggests that, on average, IPOs significantly underperform their benchmarks. Furthermore, the evidence implies significant differences across the IPO groups with regard to performance and operational indicators. The multivariate regression shows that in the long run, private equity firms outperform their counterparts, signified by greater buy-and hold abnormal returns respectively recorded within the three-year period after the IPO.