Extant literature finds that long-term abnormal stock returns are generated by a strategy based on corporate governance index values (Gompers, Ishii, and Metrick 2003). The result is inconsistent with efficient markets and suggests that information about governance is not accurately reflected in market data. Control firm portfolios are used to mitigate model misspecification in measuring long-term abnormal returns. Using a number of different matching criteria and governance indices, no long-term abnormal returns are found to trading strategies based on corporate governance. The effect of a change in governance on firm value is mixed, but some support is found for poor governance destroying firm value. These results have a number of implications for practitioners, researchers, and policy makers.

The Swedish market has over the past couple of years seen a large increase in companies going public through an IPO. At the same time the capital on the private equity market is increasing for each year which enables companies to stay private longer. Our research focuses on two main areas. First, we investigate if companies that enter the public market at an early stage in the company life cycle have worse aftermarket performance than companies that wait to go public. In our research we will define companies that went public at an early stage as younger than six years at the time of the IPO, based on Brown & Wiles (2015) research, and companies that delayed an IPO as older than six years at the time of the offering. The second area investigates whether the large capital increase on the private equity market have affected the long-run aftermarket performance of IPOs.  Our dataset consists of 746 Swedish IPOs from four different Swedish stock exchanges. We will collect long-run aftermarket performance data from companies that conducted an IPO between the years 2003-2018. The long-run aftermarket performance will be measured over a three-year period. Both buy and hold abnormal returns (BHAR) and monthly abnormal returns are used to analyze the aftermarket performance of the IPO firms. Our main findings are that Swedish IPOs generally underperform the reference market index in the long run. Additionally, we find that the underperformance is generated by companies that conduct an early IPO, which makes us question the IPO readiness of these young companies. We also show that profitability is a key determinant for greater IPO aftermarket performance. Lastly, we do not provide any support that the increase in capital on the private equity markets have any effect on the IPO aftermarket performance. However, the results indicate that companies who went public after the increase of capital perform worse. In our research we contribute with practical variables for retail investors to focus on when investing in IPOs and provide companies with useful information on how to increase the chances of a successful IPO.