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The performance of private equity-backed IPOs.

My paper examines the aftermarket performance of private equip-backed initial public offerings (IPOs) and compares it to the performances of equivalent samples of venture capital-backed and other nonsponsored issues on the London Stock Exchange during the period 1992-2005. The evidence suggests marked differences across the three groups in terms of market size, industry classification, first-day returns, and key operating characteristics at the time of flotation. In fact, private equity-backed IPOs are larger firms in terms of sales and assets, more profitable, and relatively modest first-day returns. In the three years following the public listing, they display better operating and market performance when compared to other 1POs and the market as a whole.


In sharp contrast to the widespread evidence of the underperformance of initial public offerings (IPOs) in the aftermarket, flotations backed by private equity (PE) investors appear to defy the norm. Early studies by Degeorge and Zeckhouser (1993), Holthhausen and Larcker (1996), and more recently, Cao and Lerner (2009) indicate that leveraged buyouts (LBOs) returning to public status outperform other newly floated firms.

Given such superior performance, the general public interest in PE, and the growth of PE-backed IPOs, it is not surprising that they continue to attract considerable media attention. (1) The Financial News, for example, reported that such IPOs have outperformed other issues in the United States in recent years. (2) The Evening Standard described the equally strong out performance of their UK counterparts as "A Rare Tribute to Private Equity," while the Economist has portrayed the recent slow revival of the PE industry as the "Crazy Little Thing Called Leverage." (3,4) What is surprising, however, is the lack of comparative evidence regarding the performance of sponsored (both venture capital [VC]- and PE-backed) and nonsponsored IPOs, and the underlying drivers of any such differences. Cao and Lerner (2009) note that "the absence of scrutiny of RLBOs since the 1980s is especially striking due to the changes in the market." Outside the United States, the availability of such evidence is even worse. The purpose of this paper is to address this notable gap in the current literature.

In his seminal work, Jensen (1986, 1989) has argued that operational efficiencies, achieved by closer monitoring, management expertise, and higher levels of debt, are the key value drivers for the PE model. Although it is often assumed that such benefits normally accrue during the period that a company is under PE control, it is also reasonable to expect that management and financial practices put in place at that time will be maintained at least for some time after the exit. This is particularly the case since PE sponsors are responsible for the structure, terms, and timing of the float. Furthermore, the involvement of PE sponsors is not completely terminated at the time of the IPO. Lock-up agreements, performance incentives, and liquidity considerations often result in PE original sponsors retaining significant, albeit reduced, holdings for a considerable period of time after flotation. This continuing involvement of the original PE sponsors facilitates closer monitoring and reduces information asymmetries and potential conflicts with other stakeholders. This may lead to better operating performance and, depending upon initial valuations, to superior aftermarket performance as well. Thus, it could be argued that PE-backed IPOs provide a fertile ground for assessing the impact of PE in general as they offer a wider perspective of the contribution made by the PE sponsor through the full length of their involvement with the firm.

To address the existing gap in the literature and gain some further understanding of the role of PE involvement with their portfolio firms, this paper focuses on three main issues. First, using a hand-collected sample of PE-backed, VC-backed, and other nonbacked (NB) IPOs from the United Kingdom, I examine the differences in fundamental company characteristics across these three groups of IPOs. The findings reveal significant differences in size, profitability, operational efficiencies, and industry structure. More specifically, the results indicate that PE-backed IPOs at the time of flotation are larger in terms of market capitalization, total assets, and sales are more profitable, maintain higher levels of debt, and are less underpriced than other IPOs. The relatively lower underpricing of PE-backed IPOs is consistent with the size and maturity of these companies and reflects the relatively lower risks of such issues. At the same time, the cautious first-day reception by the market is also indicative of the investors' reservations about such issues linked to the general perception of aggressive pricing by PE sponsors and the apparent apprehension, on the part of investors, regarding their relatively high leverage ratios of such IPOs just before flotation.

Additionally, this paper documents significant differences in the aftermarket performance across the three groups of IPOs. While abnormal buy-and-hold returns of PE-backed IPOs remain positive and significant during the entire period under consideration, the performance of the VC-backed IPOs and their nonsponsored counterparts is consistently poorer or negative. The positive and significant intercepts in the Fama and French (1993) regressions for PE-backed IPOs also confirm that their out performance is not due to size or book-to-market effects. Furthermore, in spite of some sizable differences in cohort and calendar performances, the evidence also suggests that the differences are not due to timing of the different IPO groups or the result of some extreme performances of a very small group of IPOs.

The evidence of high first-day returns and underperformance in the aftermarket for VC-backed and other not sponsored IPOs is consistent with the mispricing view of IPO underperformance put forth by Ritter (1991) and Loughran and Ritter (1995). They are also consistent with Miller (1977) who argues that investors who buy IPOs initially tend to be those who are the most optimistic about their prospects, Purnanandam and Swamithanan (2004) who show that the most overvalued IPOs run up the most on the first day and revert to fair value in the long run, and Aggarwal, Bhagat, and Rangan (2009) who find no clear pattern in the relation between earnings and valuations. The mispricing argument receives even further support from the preliminary evidence on the operating performance differences across the three groups of IPOs. In sharp contrast to a number of studies that report deterioration in IPO operating performance in the three years following flotation, the evidence in this paper suggests that PE-backed IPOs are more profitable and efficient when compared to other IPOs both on absolute and industry-adjusted bases during this same time frame. (5) Thus, it could be argued that investors are surprised by the marked reduction of debt and the strong operating performance in terms of profit margin and asset turnover in the three years after flotation.

Finally, the paper examines the pattern of relationships between the three-year aftermarket performance and various aspects of the firms' characteristics immediately after the IPO. The results of the cross-sectional regression analysis suggest marked differences across the three groups of IPOs. More specifically, the relatively superior long-term performance of PE-backed IPOs is positively related to the proportion of equity maintained by the PE sponsor(s) and the level of leverage immediately after flotation. Although the positive coefficient for leverage differs from the results of Cao and Lerner (2009), the general empirical evidence regarding the relation between leverage and stock returns is rather mixed. While a number of studies find a negative association (Dimitrov and Jain, 2008; Korteweg, 2010), others document a positive relation (Hamada, 1972; Bhandari, 1988; Hou and Robinson, 2006). More recently, Gomes and Schmid (2010) indicate that the link between leverage and stock returns might be more complex and depends crucially on how debt is used and its impact on the firm's investment opportunities.

This is not the first study to suggest that the cross-section variation of IPOs aftermarket performance may be predictable on the basis of various firm characteristics. Field and Lowry (2009) report that from 1980 to 2000, the top 100 IPOs earned over 1,000% in their first three years of trading compared to -99% for the bottom 100 IPOs. Characteristics like firm age (Ritter, 1991), underwriter reputation (Carter, Dark, and Singh, 1998), VC backing (Brav and Gompers, 1997), initial price multiples (Purnanandam and Swamithanan, 2004), firm size, and book-to-market ratios (Brav, Geezy, and Gompers, 2000) are related to long-term aftermarket performance. PE sponsorship appears to embrace a number of such value creating characteristics. Finally, the findings of this paper may also act as a reminder that any emerging variations of average IPO performance across time and countries may indeed differ depending upon the composition of the overall sample in terms of PE, VC, and other nonsponsored issues.

The rest of the paper is organized as follows. Section I provides a brief literature review of aftermarket performance for PE- and VC-backed IPOs. Section II describes the unique sample and methodology used in this study. Section III highlights the key differences across the three groups of IPOs in terms of timing, size, industry composition, first-day performance, and operational characteristics. Section IV outlines the evidence of aftermarket performance, while Section V explores performance differences across various types of IPOs. Finally, Section VI outlines the main conclusions of the paper and offers suggestions for future research.

I. Related Literature

The weight of international evidence regarding IPOs in general suggests sizable positive returns on the first day of trading and significant underperformance in the aftermarket. The positive first-day returns are often related to the characteristics of the IPOs themselves or their sponsors, various types of information asymmetries, or just market overreaction. In contrast, long-run underperformance is linked to windows of opportunity enticing companies to go public when investors are overly optimistic about the market and/or the industry in which such companies operate.

Both first-day returns and aftermarket performance differ across the types of IPOs and performance estimation methodologies. Megginson and Weiss (1991), for example, demonstrate that VC-backed IPOs have relatively lower first-day returns, which they attribute to VC certification reducing information asymmetry between investors and issuing firms. They also find that VC-backed IPOs are younger relative to their NB counterparts, consistent with Gompers' (1996) grandstanding hypothesis. Lee and Wahal (2004) and Hogan, Olson, and Kish (2001) find a similar pattern of lower average first-day returns for a sample of reverse LBOs from 1988 to 1998.

The differences across various groups of IPOs are even more striking in terms of aftermarket performance. For example, from 1972 to 1992, Brav and Gompers (1997) find that their sample of 934 US VC-backed IPOs outperforms non-VC-backed IPOs, at least in equal-weighted returns. Such superior performance by VC-backed IPOs is often attributed to better management teams and corporate governance structures that help these companies to perform better in the long run. Krishnan et al. (2009) provide further support to this view by confirming that VC firms with better reputations invest in portfolio companies with better long-run post-IPO performance.

Outside the United States the evidence is rather mixed. Rindermann (2004), for example, using a rather small sample of VC-backed IPOs in Germany, the United Kingdom, and France, finds some evidence of underperformance for VC-backed IPOs in Germany and the United Kingdom, but such differences were not statistically significant. Instead, he finds that a subgroup of internationally operating venture capitalists have a positive effect on both the operating and market performance of portfolio firms. Hamao, Packer, and Ritter (2000), using a sample of 355 Japanese IPO firms from 1989 to 1994, also find no general evidence of superior long-run performance of VC-backed IPOs, except for firms backed by foreign-owned or independent venture capitalists.

There is also evidence regarding the long-run performance of reverse leveraged buyouts (RLBOs). Muscarella and Vetsuypens (1990) report significant improvements in profitability before returning to public markets. Early studies by DeGeorge and Zackhauser (1993) and Holthhousen and Larcker (1996) also find evidence of better accounting performance by RLBOs before flotation when compared to their peers and no evidence of market underperformance. In their study of 85 RLBOs, Mian and Rosenfeld (1993) report better aftermarket performance that appears to be driven by takeover activity. Such activity occurs during the second year, the time period in which the RLBOs appear to perform the best. More recently, Cao and Lerner (2009), using a large sample of RLBOs from 1980 to 2002, provide evidence of outperformance in the five years after the IPO when compared to other IPOs and various market benchmarks. This outperformance appears to be consistent across different benchmarks, but high leverage is not affecting performance. Ritter (2010), in a recent website report for the period 1980 to 2006, demonstrates an average three-year buy-and-hold market-adjusted return for VC-backed IPOs of -12.9% and an equivalent return of 7.1% for their PE (buyout) counterparts.

Cao (2008, 2010), in an effort to shed additional light into the role of buyout sponsors on the aftermarket performance of RLBOs, examines the impact of IPO timing on the LBO restructuring process and subsequent exit strategies. He finds that the length of PE involvement prior to the IPO is negatively related to the hot IPO market proxy and industry valuation, suggesting that sponsors spend less time in LBOs under favorable external market conditions. Furthermore, RLBOs with shorter LBO duration experience greater deterioration in aftermarket performance after the flotation, while the listing of immature RLBOs (quick flips) leads to a high probability of financial distress. He also finds that buyout sponsors maintain significant proportions of equity after the IPO and continue to play an effective role in corporate governance post-IPO, particularly in firms of a relatively larger size. Their decision about their post-IPO continuing involvement is based on company fundamentals and market conditions.

Katz (2009) offers further insights into the role of PE sponsors on the aftermarket performance of PE-backed IPOs. His findings indicate that PE-backed firms generally have higher earnings quality than those that do not have PE sponsorship, engage less in earnings management, and report more conservatively both before and after the IPO. He demonstrates that firms with majority ownership by PE sponsors experience better long-term stock price performance. Moreover, firms run by larger sponsors exhibit better long-term financial and stock price performance when they go public.

The evidence regarding the performance of PE-backed IPOs outside the United States is sparse and inconclusive. Jelik, Saadouni, and Wright (2005) focus on the performance of management buyouts exiting through an IPO, but they find no evidence of significant differences in the long-run performance between PE-backed MBOs and their non PE-backed counterparts. Bergstrom, Nilsson, and Wahlberg (2006) also examine the performance of a sample of PE-backed IPOs in London and Paris. Although they do find that PE-backed IPOs outperform other IPOs, both groups exhibit strong negative abnormal returns for periods of up to five years in the aftermarket.

The evidence regarding the positive aftermarket performance of PE-backed IPOs is entirely consistent with a separate but interrelated stream of literature documenting positive performance for LBOs in the period following the transaction. Acharya, Hahn, and Kehoe (2010) find that the difference in performance between buyouts and other similar firms is related to operational strategies and governance changes. More specifically, they find that these two factors account for an average 20% to 30% of average deal interest rate return (IRR), another 25% to 35% is due to financial leverage, and the remaining relates to the exposure to the quoted sector. Guo, Hotchkiss, and Song (2010), using a sample of 94 LBOs completed by 2005, indicate that cash flow gains are greater for firms with higher prebuyout leverage and greater increases in leverage as a result of the buyout.

Weir, Jones, and Wright (2008), using a unique sample of public to private transactions in the United Kingdom from 1997 to 2004, provide additional insight into the performance of LBOs and the impact of PE. They demonstrate that public-to-private transactions (PTPs) backed by PE experience higher than industry average debt. Furthermore, while performance deteriorates relative to the prebuyout situation, such firms do not perform worse than those remaining public. In fact, they find some evidence of performance improvement. Their evidence also suggests significant financial performance enhancement driven by improvements in efficiency and increases in liquidity. Kaplan (1989) also provides evidence of value creation by LBOs through improvements in operating performance, closer monitoring, and higher levels of leverage.

In short, while there is still disagreement about the performance of VC-backed IPOs in the United States and other countries, the weight of the evidence, at least in the United States, points to consistently positive excess returns for IPOs backed by PE investors. Although it is often argued that such superior performance is related to agency issues, closer monitoring, and possibly leverage, the extant evidence remains both limited and inconclusive.

II. Sample and Methodology

This study uses a sample of 1,595 IPOs listed on the two London Stock Exchange markets, the Official List (often referred as the Main market) and the Alternative Investment Market (AIM), from January 1992 to September 2005. The latter was launched in June 1995 and is the typical listing location for smaller companies with a short or no previous trading record. Across the three groups of IPOs, AIM accounts for about two-thirds of all issues in the sample. The full schedule of IPOs listed in UK markets originates from the London Stock Exchange statistics covering details for industry classification, market capitalization, amount raised, and issue price. The sample excludes investment trusts, relistings, and transfers across the markets.

The identification of VC-backed and PE-backed IPOs remains a challenge. This is due to the combined effect of limited publicly available information for private companies and the overlapping nature of the sponsors' involvement in both VC and PE transactions. The majority of US studies are based on samples of firms that return to public status, RLBOs, after a period of restructuring under private ownership.

For the purpose of this study, a PE-backed IPO is defined as a company where the PE sponsor(s) has a controlling interest acquired at the time of the buyout. This group also includes, but is not restricted to, companies returning to public ownership following a LBO and a period of private ownership (RLBOs). They often have a highly leveraged capital structure, but this is not a criterion for defining an IPO as PE backed. VC-backed IPOs are companies that have received start-up, development, or expansion VC backing at some point before going public. The funding for such purposes could take place in a single transaction or several rounds. In contrast to the PE-backed group, VC sponsors usually have a minority interest and are prepared to invest for longer periods.

A number of different sources were used to identify VC- and PE-backed IPOs. For example, Unquote, a trade publication, provides regular details on individual VC and buyout transactions. Thomson Venture Expert also provides coverage of the various types of exits by PE firms. Additional information on the nature of the individual IPOs was obtained from Factiva searches on individual companies. The final classification of VC- and PE-backed IPOs was completed on the basis of information from the individual company prospectuses obtained through the Perfect Filings database, and the extensive assistance of the British Venture Capital Association (BVCA). The prospectuses also provided information on other characteristics of all IPOs including the identity of underwriters, VC, and PE sponsors. The accounting data prior to the IPO are collected from the individual prospectuses and the FAME database while the equivalent post-IPO data are from Datastream. They also provided information regarding the PE and VC ownership stakes before and after flotation. Such information, however, is not complete, particularly for the preflotation period. The sample comprises 1,595 non PE-backed (NB), 250 VC-backed, and 204 PE-backed IPOs. (6) This final sample provides a far-reaching representation of the population of venture and PE-backed IPOs in the United Kingdom.

A total of 118 sponsors are involved in the 454 VC- and PE-backed IPOs. It is also worth noting that unlike the United States where buyout and VC firms are largely distinct, in the United Kingdom, there is a significant overlap among the sponsors in VC- and PE-backed IPOs. About 40% of the total 118 sponsors have been involved in both types of transactions during the sample period 1992-2005. The 3i Group, as the largest UK sponsor, has been involved as a single backer or as a member of a syndicate in 84 VC-backed and 61 PE-backed IPOs. Thus, in total, 3i Group has been involved in 32% of the total 454 VC- and PE-backed IPOs. The majority (52%) of the PE-backed IPOs involved only a single sponsor, while the remaining 48% included more than one PE group (club deals). In some cases, a total of six sponsors were involved in the same buyout. The number and reputation of the sponsors reflects, to a certain extent, the market capitalization of the corresponding IPOs. Market size differences are also reflected in the size of the sponsor syndicates for VC- and PE-backed IPOs. For instance, the average size of the syndicate for VCs is one and a half sponsors, while the equivalent size for buyouts is two. In total, 14.2% of all PE-backed IPOs have more than three sponsors compared to only 6% for VC-backed IPOs. It is also worth noting that a total of 163 underwriters were involved in all 1,595 IPOs. (7)

Buy-and-hold returns for each IPO are generated by compounding 36 monthly returns in addition to the first partial month after the first day of trading. When a firm in a portfolio is delisted from the database, the portfolio return for the next month is an equally weighted average of the remaining firms in the portfolio. Thus, the proceeds of the delisted firm are equally allocated among the surviving members of the portfolio in each subsequent month. The monthly returns data, including capital appreciation and dividends, as well as the first partial month of trading for the individual IPOs, was obtained from Datastream. The null hypothesis that the mean BHARs are equal to zero is tested using the skewness-adjusted t-statistic with bootstrapped p-values as suggested by Lyon, Barber, and Tsai (1999) and adapted by Jelik et al. (2005). The aftermarket performance (BHAR) for each of the three samples of IPOs is computed as

BHAR = 1/N [N.summation over (i=2)][([T.product over (t=1)] (1 + [])) - ([T.product over (t=1)] (1 + []))], (1)

where [] and [] are the raw returns on IPO i and the selected benchmark b at event month t.

BHARs are reported for four benchmarks: 1) the FTSE All-Share Index, 2) a size-adjusted benchmark reflecting the market capitalization of individual companies, 3) an industry benchmark reflecting the broad industry classification of each IPO, and 4) a style benchmark matching the individual characteristics (size and book-to-market) of the firms in the sample of IPOs. The FTSE All-Share Index consists of three subindexes. First, the FTSE 100 comprises the 100 largest companies on the London Stock Exchange, representing approximately 80% of the UK market. Additionally, the FTSE 250 includes the midcapitalized companies not covered by the FTSE 100 and representing approximately 17% of UK market capitalization. Moreover, the FTSE SmallCap is composed of companies outside the FTSE100 and FTSE250 and represents approximately 2% of the total market capitalization. The size-adjusted benchmark used in this study assigns IPOs to one of these three benchmarks according to the market value of the IPO at the date of the offer. Given the predominance of small companies in the sample, 3% of the IPOs are assessed against the FTSE100, 17% on the FTSE250, and the remaining 70% on the FTSE SmallCap Index. (8) Industry-adjusted BHARs are based on the 10 broad FTSE sector indexes. Size and book-to-market style benchmarks are formed by grouping all Official List and AIM companies in six (2 x 3) portfolios on the basis of size and the ratio of book equity to market equity. (9) Portfolio returns are calculated on a monthly basis and rebalance on a semiannual basis using data from Datastream for the entire population of UK companies listed in the two exchanges during the sample period. (10)

BHARs are reported both on equal- and value-weighted bases with weights based on the market values at offer for each of the three groups, adjusted for inflation and the actual number of IPOs included in the BHAR estimates for each of the 36 months. Finally, the aftermarket performance is also assessed using the Fama and French (1993) three-factor model with equal- and value-weighted returns as follows:

[] - [R.sub.ft] = [a.sub.i] + [b.sub.i]([] - [R.sub.ft]) + s [SMB.sub.t] + h [HML.sub.t] + [[epsilon].sub.t]. (2)

The three factors are ([] - [R.sub.ft]), which is the excess return on the value-weighted market portfolio. Small minus big (SMB) is the return on a portfolio formed by subtracting the return on a large from the return on a small firm portfolio. The breakpoints for small and large firms are defined by firms in the main market alone, but the portfolios contain firms traded on main and AIM markets. High minus low (HML) is the return on UK-listed high book-to-market return minus the return of the low book-to-market portfolio and [R.sub.f] is the 90-day UK Treasury bill rate. (11)

III. Comparative Statistics across the Three IPO Groups

Table I provides details of the annual composition for the whole sample (ALL) of 1,595 UK IPOs included in this study from January 1992 to September 2005; 250 of them were VC-backed, 204 had PE backing, and the other 1,141 were ordinary IPOs without any VC or PE backing (NB). A total of 63.1 billion [pounds sterling] has been raised by the entire sample of IPOs during the sample period. PE-backed buyouts account for 12.8% in terms of volume and 21.7% in terms of the amount raised. Alternatively, VC-backed IPOs account for 15.7% in terms of volume but only 9.9% of the total amount raised. The table also presents significant variations and cycles of IPO activity during the sample period. More than 50% of the total number of PE-backed IPOs was listed during the four-year period of 1993 to 1996, representing exits from the previous buyout wave in the late 1980s. The technology IPO boom peaked in 2000 with 183 non PE-backed IPOs, 33 VC-backed IPOs, and only eight PE-backed IPOs coming to the London markets.

Both the relative size of the PE-backed IPOs and the surge in such activity in the 1990s are broadly consistent with the US pattern described in Cao and Lerner (2009). In the United States, however, VC-backed offerings account for a considerably larger proportion of the total IPO market than in the United Kingdom. This could be due to the relative importance of Silicon Valley and biotechnology in the United States, but it may also be due to possible data collection limitations.

PE-backed IPOs are, on average, larger companies in terms of market capitalization (125 million [pounds sterling]) than their VC-backed counterparts (84 million [pounds sterling]) and other IPOs (100 million [pounds sterling]). The average statistics, however, for the amounts raised and market capitalization mask significant differences in the size distribution of the three groups. A closer examination reveals that almost 60% of the NB IPOs joined the markets at market capitalization below 20 million [pounds sterling], compared to 38% and 17% of IPOs in this size bracket for VC and PE backed, respectively. In total, across the three groups, there are 28 IPOs with a market capitalization larger than a 1 billion [pounds sterling] at the offer price accounting for almost half (46%) of the total market value of all IPOs in the sample. Interestingly, 24 of them are NB, three are VC backed, and only one is a PE-backed IPO. In fact, the three VC-backed issues account for 19% of the total market value of this particular group.

The three groups of IPOs also differ in terms of industrial distribution. Table II presents the number and total amount raised by industry and highlights some significant differences among the three groups of IPOs. While for example, 60% of the amount raised for PE-backed IPOs relates to Consumer Goods and Services. VC-backed issues are more involved in the Health Care and Technology sectors (45%), particularly during the dotcom boom. Financials account for about 24% of the NB IPOs. The differences in industrial distribution across the three groups are also important, as they may have implications for the differences in aftermarket performance.

Table III (Panel A) presents summary statistics for the size and operating performance of the three groups of IPOs. More specifically, it reports the median values of the number of employees, market capitalization, total assets, net sales, EBITDA, sales to total assets (asset turnover), EBITDA to sales (operating margin), and total debt to total assets (leverage) for each of the three groups of IPOs. All estimates are computed during or at the end of the fiscal year of the IPO.

PE-backed IPOs are not only larger in comparison to their counterparts in terms of market capitalization, but they also differ across a number of other operational characteristics. For example, in terms of net sales and total assets, they are about four to seven times larger than NB and VC-backed IPOs. They also have a record of solid positive earnings in contrast to their counterparts that are only marginally profitable. For example, the last EBITDA estimate for the typical PE-backed IPO was 5.2 million [pounds sterling], while equivalent estimates for VC-backed and other IPOs are well below the 1 million [pounds sterling] mark. Such differences are not surprising given that PE and VC investors apply very different criteria in their selection of portfolio companies.

However, despite the differences in size and profitability, the relative valuations of PE-backed issues at the time of flotation, both in terms of market capitalization to EBITDA and sales, are relatively modest in comparison to their VC and NB counterparts. Such differences in valuations may reflect the timing of their respective flotations, their industry composition, the perceived riskiness of such IPOs, and the need to protect the reputation of PE sponsors who need to manage a stream of divestments. For instance, in terms of timing, Table I reports that the majority (55%) of the total number of PE-backed IPOs were floated from 1993 to 1996. In sharp contrast, only 18% and 39% of the NB and VC issues went public during the same period. In contrast, a relatively large number of small VC-backed and other NB IPOs dominated the technology bubble of 1999-2000. Furthermore, Cao (2010) finds that RLBO sponsors are more likely to exit their investments during hot market conditions.

PE-backed IPOs are also more effective in terms of asset turnover with a ratio of 1.48 compared to 1.05 for their VC counterparts. Their operating margin of 15% is almost twice (7.7%) the equivalent of NB and about three times (5.4%) the equivalent of NB and VC-backed issues. Given the nature of the PE model, it is also not surprising that the debt to total assets ratio for PE-backed IPOs is 44.2%, twice the equivalent levels of their NB and VC counterparts. The average leverage estimates, reported in Table III, are consistent with Brav's (2009) findings on the debt utilization by private firms in United Kingdom but higher than the equivalent leverage ratio for RLBOs in the United States reported by Cao and Lerner (2009). It is worth noting, however, that the exact debt ratio is sensitive to the exact timing of the flotation in relation to the fiscal year-end. For example, the last available accounts for some companies refer to the situation just before flotation, while for others, it is soon afterward.

Table III, Panel B presents summary statistics for the number of years of VC and PE investment prior to the IPO and their respective percentage ownership before and after the IPO. VC sponsors are involved with their portfolio companies for an average of 4.5 years before flotation; the equivalent investment duration for PE investors is just 3.7 years. There are also marked differences in the ownership structures, before and after the IPO, among VC and buyout transactions. In a typical buyout, the PE group(s) will normally maintain significant ownership holdings in their portfolio companies. PE investors hold an average of 55.9% of the company's equity just prior to the IPO. The equivalent proportion for VC-backed companies is only 33.9%. Immediately after flotation, both VC and PE sponsors reduce their percentage of ownership to 23% and 26%, respectively, of the expanded equity basis. Cao (2010) reports a broadly similar pattern for RLBOs in the United States.

Thus, PE-backed IPOs in the United Kingdom are markedly larger in terms of assets than RLBOs in the United States (Cao and Lerner, 2009), but they are almost identical in terms of length of investment and ownership by the PE groups before the IPO. US PE investors, however, appear to retain a larger proportion of their floated companies immediately after the IPO (39.9%) when compared to their UK counterparts (23.6%).

Table IV reports summary statistics for first-day returns for each of the three groups of IPOs and for the sample as a whole. The average first-day return across all IPOs from 1992 to September 2005 was 18.6%, a level somewhat higher than the equivalent estimates reported in previous UK studies. The 1999-2000 dot-corn bubble had a striking effect on first-day returns for VC-backed and other IPOs, reaching 83.5% and 39.5%, respectively, while the equivalent average returns for the PE-backed IPOs are practically unaffected by this sample period. (12) This is likely to reflect the relatively few PE-backed IPOs floated in the London markets during the bubble period and the small number of such issues in the technology sector. In general, however, the average first-day returns are driven by the strong performance of smaller IPOs. The value-weighted return across all IPOs is just 9.9%.

There are also marked differences in average equal-weighted first-day returns among the three groups of IPOs. In particular, the average first-day returns for nonsponsored IPOs is 21.1%. Their VC- and PE-backed counterparts end their first day of trading at equivalent returns of 14.1% and 9.1%, respectively. The lower underpricing of PE-backed IPOs, both in equal- and value-weighted terms, is probably the combined result of lower risk, more aggressive pricing, and PE group certification. A similar picture emerges from the average money left on the table by each of the three IPO groups. PE-backed IPOs leave only 7.3 million [pounds sterling] on the table, while the equivalent amounts for their VC and NB counterparts are 16.9 [pounds sterling] and 12.4 million [pounds sterling], respectively.

IV. Long-Run Performance

Table V reports buy-and-hold abnormal returns (BHARs) for the entire sample of IPOs from January 1992 to September 2005 calculated until the earlier of the three-year anniversary or the delisting date. The latest date for returns data is September 2008. The results are reported for 12-month intervals, excluding first-day returns, for each of the three groups and the whole sample of IPOs using three alternative benchmarks: 1) the FTSE All-Share Index, 2) the FTSE size-matched benchmark, and 3) the FTSE sector indexes described in Section III. The number of IPOs included in the calculation of returns declines with the month of seasoning. The 36-month estimates are based on an average of 83% of the original sample of IPOs, with only marginal variations across the three groups. The reduction in the samples is due to the combined effect of delistings following mergers, suspensions, and bankruptcies.

The results for the entire sample of IPOs in Table V (Panel A) are consistent with the early US and UK evidence by Ritter (1991) and Levis (1993), respectively, and numerous other subsequent studies. The 36-month BHARs are negative and statistically significant, confirming the established pattern of average long-term underperformance. The results, however, also reveal striking differences in the long-term performance across the three groups of IPOs. The negative average returns for the entire sample are predominantly due to the poor performance of NB IPOs. The equivalent performance of VC-backed issues is not statistically significant from zero, while PE-backed IPOs outperform all three benchmarks in the aftermarket. For example, the BHARs based on the size-adjusted benchmark rise from a significant 6.32% at the end of the first year of trading to 14.92% at the second, and 22.4% at the end of the third year.

Panel B reports the equivalent value-weighted BHARs for the three groups of IPOs and for the whole sample. It is interesting to note the sharp contrast in the 36-month performance between the NB and VC-backed IPOs. While large NB IPOs perform better than their smaller counterparts, reducing the abnormal return from a significant -20.2% to just the same level as the FTA benchmark, the performance of the large VC-backed IPOs is much worse. The equivalent returns drop to -22% but remain insignificant. In fact, the significant drop in the value-weighted returns is largely due to the very poor performance of the three billion plus issues in this group. (13) Market capitalization has a marginal positive impact on the performance of the PE-backed buyouts; thus, the value-weighting scheme provides some further support to the emerging positive performance of this group of IPOs.

Given the evidence by Brav and Gompers (1997) and others, the value-weighted underperformance of VC-backed IPOs, shown in Table V, may be somewhat surprising. Although this reflects, to a certain extent, the particular characteristics of the type of issues that are included in the respective samples, it is still worth noting the remarkable similarities between the aftermarket performance of VC- and PE-backed IPOs and the performance of equivalent VC and buyout funds. The BVCA (2008) report suggests that while large MBO funds generated a 23.7% return since 1996, small MBOs generated a modest 7.3% IRR, and the venture funds had a negative IRR of 1.6% during the same period.

It is also worth noting that the outperformance of PE-backed IPOs for all three alternative benchmarks is stronger than the equivalent returns reported by Cao and Lerner (2009) for the United States. Furthermore, their performance continues to improve over the three-year period, in contrast to the United States where there is almost no further increase in excess returns after the first year.

Panels A and B in Table VI present the Fama and French (1993) three-factor model results based on monthly returns. The three factors are: 1) RMRF, the excess return on the value-weighted market portfolio; 2) SMB, the return on a zero investment portfolio formed by subtracting the return of a large firm portfolio from the return on a small firm portfolio; and 3) HML, the return on a high book-to-market portfolio minus the return on a portfolio of low book-to-market stocks. The intercept of the time-series regressions is an indicator of risk-adjusted performance on each of the three groups of IPOs.

Consistent with the findings of the previous table, the equal- and value-weighted alphas for the Fama and French (1993) PE-backed IPOs are 0.8% per month and statistically significant. The beta coefficients on market premium RMF are positive and significant with an average coefficient of 1.0. Only the VC-backed IPOs have positive exposure to size (SMB), while all three groups have negative and significant exposure to price-to-book (HML).

Empirical evidence and conventional wisdom suggest clear patterns in the long-run performance of IPOs. More specifically, years of heavy issuing activity are associated with the most severe underperformance in the aftermarket. The inclusion of the technology bubble in this study's sample period is bound to have a significant impact on the average estimates of long-term performance. Table VII provides a vivid illustration of such patterns by examining the three-year performance of annual IPO cohorts in equal- and value-weighted terms. PE-backed IPOs outperform the FTSE All Index in 10 of the 14 years, and the excess return is particularly strong for the cohorts of 1995, 1997, and 2002. In fact, all IPOs launched in 1997 appear to have benefited from the rise in the market as a whole in the subsequent three years. Alternatively, VC-backed IPOs floated from 1999 to 2000 suffered in the following three years both in equal- and value-weighted terms. Thus, although the positive aftermarket performance of PE-backed IPOs appears to be somewhat related to their timing, it is also clear that the overall positive performance is not due to a very small number of exceptional cohorts. A broadly similar picture emerges from the value-weighted results in the same table.

It is also interesting to note the marked variations in performance documented by the BVCA (2008) annual performance report. The 1994 vintage continued to be the best performer from inception to 2007, but investors were disappointed with the performance of 1997 to 2000 vintages.

Bray and Gompers (1997) point out that the annual cohort results in the previous table may be misleading regarding the extent and magnitude of underperformance as the returns of recent IPOs firms may be correlated. This may be particularly pronounced in years of exceptional events and IPO activity like the technology bubble in 1999-2000 included in this study. Thus, Table VIII reports equal- and value-weighted calendar time returns for the three groups of IPOs. Each month, the return on all IPOs that went public within the past three years is calculated. The annual return in each year is the compound return from January to December of these average monthly returns.

The value-weighted BAHRs suggest that PE-backed IPOs had a continuous run of positive performance in every single year during the six-year post bubble period (2001-2006) that came to an end in 2007. The relatively few issues listed since September 2004 outperformed the FTA benchmark during the 12-month period to September 2008, at a time when the market had already entered into a deep downward slide.

Given the marked differences in size and other operating characteristics across the three groups of IPOs reported in Table III, it is reasonable to suspect that the differences in aftermarket performance are just a reflection of these features. Thus, following Cao and Lerner (2009), Table IX reports a number of performance robustness checks. Panels A and B examine the aftermarket performance differences across the three groups by restricting the size of assets to more than 40 million [pounds sterling] (Panel A) and sales to more than 10 million [pounds sterling] (Panel B). The top 45.2% PE-backed IPOs in terms of assets continue to outperform their counterparts, but the relatively small proportions of VC-backed and other NB IPOs in this size bracket perform markedly better than the average in the equivalent groups. For instance, the buy-and-hold returns for the 24.7% of VC-backed IPOs that exceed the threshold is 15.6%, while the equivalent return for NB IPOs increases from an average of -12.1% in Table VI to 1.8%.

The performance profile for the three IPO groups is even more striking when the comparison is restricted to issues with sales greater than 10 million [pounds sterling]. While 87.3% of the PE-backed IPOs in this bracket generate a 36-month buy-and-hold return almost identical to the average of the whole group, the 39% of the VC-backed IPOs with sales of more than 10 million [pounds sterling] generate an abnormal cumulative return of 30.9%; thus, effectively outperforming their PE counterparts. Marked performance improvements are also evident for the NB IPOs.

The third robustness check in Panel C relates to financial leverage and restricts the comparison across IPOs with total debt to total assets higher than 10%. The contrast across the three groups becomes even sharper than in Panels A and B and the average buy-and-hold returns reported in Table V; 76.6% of the PE-backed IPOs exceeding this threshold markedly outperform their counterparts with similar levels of debt in their capital structure.

In short, the evidence suggests that while the positive performance of PE-backed IPOs is very consistent across different dimensions of operational characteristics, it is important to note that the underperformance of their counterparts is, to a certain extent, related to their size at the time of flotation. Other firms of the same size and maturity at the time of flotation may perform as well as their PE-counterparts. PE-backed IPOs, however, appear to differ from their counterparts in respect of the implications of debt utilization on long-run performance.

The results in previous tables suggest that PE-backed IPOs are typically larger and more profitable firms, are more conservatively priced at the time of the IPO, have lower first-day returns, and clearly outperform their counterparts in the aftermarket. To gain some further understanding of the complex interaction between IPO valuations, market reception on the first day of trading, and aftermarket performance, Table X reports the median operating performance from the year just before the flotation to three years afterward for the three groups of IPOs. Panel A reports asset turnover, while Panel B reports operating margin defined as the ratios of EBITDA to total assets. Panel C reports leverage ratios defined as total debt to total assets. Each panel reports both raw performance as well as industry median-adjusted performance. The numbers in parentheses are Wilcoxon-Malm-Whitney nonparametric test statistics for testing the equality of medians.

Two key observations are immediately apparent from Table X. First, consistent with previous studies, the operating performance of all IPOs gradually deteriorates after going public. This pattern is more apparent in the industry-adjusted estimates. This is also the case for the leverage ratios for all three groups, but the reduction is particularly striking for the PE-backed IPOs. Their total debt to asset ratios after the first year of listing become almost identical to the other groups of IPOs and their industry peers. This evidence is consistent with the view that following the upbeat initial valuations and the relatively high first day, investors are surprised by the deterioration in operating performance of NB and VC-backed IPOs. Alternatively, the strong aftermarket performance of PE-backed IPOs suggests that investors are positively surprised by the relative persistence of their operating performance and the rapid reduction of their debt ratios.

V. Performance Differences across IPOs

The positive aftermarket performance of PE-backed IPOs may be related to either the nature and characteristics of PE-backed IPOs or their initial valuation in relation to the investors' expectations about their future prospects. In a preliminary attempt to shed some light on this issue, Table XI reports separate multivariate regression results for the whole sample of IPOs and for each of the three groups separately. The dependent variable is the natural logarithm of the equally weighted 36-month wealth relative. This is the buy-and-hold cumulative return for each of the groups of IPOs divided by the equivalent buy-and-hold return of the FTA All-Share Index. It is also important to note that the coefficients in these regressions cannot be interpreted as evidence of causality, as the explanatory variables are endogenous choices of the VC or PE sponsors.

For the sample as a whole (Columns 1 and 2) and the NB IPOs (Columns 3 and 4), the right-hand-side variables are in two groups. The first represents IPO characteristics at the time of the offer (i.e., the first-day return, the logarithm of market value at the offer, the price to book at the offer price) and a dummy for the dot-com bubble period. The second group includes operating characteristics assets turnover (sales to total assets) and leverage (total debt to total assets) at the first fiscal year after flotation. Although there are changes in both of these operating variables across all three groups of IPOs immediately after flotation, these are particularly pronounced for the leverage ratios of PE-backed IPOs. Their debt to total assets is reduced from a median of 44.1% before flotation to just 18.1% by the end of the fiscal year after the flotation. Even at this level, however, the debt ratios for PE-backed IPOs are twice the level of their VC and NB counterparts. For VC- and PE-backed IPOs (Columns 5-10), there is a third group of variables that includes the proportion of equity retained immediately after flotation by the VC or PE sponsor and the number of years of sponsors' involvement before the IPO. (14) All 10 regressions control for industry fixed effects.

Columns (1) and (2) for the whole sample of IPOs demonstrate a negative and significant coefficient for the intercept and a positive and significant coefficient for the PE dummy, confirming the superior aftermarket performance for PE-backed IPOs. The VC dummy is also positive, but not significant. These results are entirely consistent with the pattern of aftermarket performance for the three groups of IPOs reported in Table V.

The coefficient for the first-day return is negative in columns for the whole sample (1), NB (3), and VC-backed (5), but significant only for the first two groups. In sharp contrast, the equivalent coefficient for PE-backed IPOs is positive and significant (Column 8). In Table IV, I demonstrate that that the average first-day return for NB IPOs is more than twice (21.1%) the equivalent level of return for their PE-backed counterparts (9.1%). These findings are consistent with the notion that the price levels emerging at the end of the first day of trading for NB IPOs are unsustainable and are gradually corrected, leading to aftermarket underperformance. Conversely, the positive and significant coefficients in Column (8) are indicative of the market's restrained reception on the first day of trading and the gradual adjustment in the aftermarket.

The coefficient for the logarithm of market capitalization is positive and significant for the same two samples of IPOs, a result also consistent with the marked differences in the results for equal- and value-weighted returns presented in Table IV. The coefficient for the bubble period of July 1999 to June 2000 is negative and significant, reflecting the excessive initial valuations during this specific period.

The results related to the two operating performance indicators are also of interest as each of the three groups of IPOs emerges with a distinct pattern (Columns 4, 6, and 9). The aftermarket performance of NB IPOs is positively and significantly related both to asset turnover and leverage, while VC-backed IPOs are related to asset turnover only. In contrast to Cao and Lerner (2009) for their US sample of RLBOs, but consistent with Jensen's (1989) notion of value creation by PE, there is positive and significant correlation between leverage and the 36-month aftermarket performance. This positive and significant coefficient is also consistent with the evidence from LBOs (Acharya et al., 2010) and the widely held view that high utilization of debt is potentially one of the key drivers for the PE model.

Columns (7) and (10) apply to VC- and PE-backed groups only and include two additional variables. These are the length of VC/PE involvement with the firm prior to IPO and the proportion of the sponsor(s)', VC or PE, percentage ownership immediately after the IPO. In contrast to Cao (2010), the coefficients for the sponsor's length of involvement prior to the IPO, reflecting the maturity of the issue, are not significant. Finally, the coefficients for the VC/PE ownership immediately after flotation are significant for both groups of IPOs, but are of opposite signs. I demonstrate in Table III, Panel B, that PE sponsors reduce their equity holdings from a typical 58.8% to 23.6%. These levels of holdings still allow them to have a meaningful direct or indirect influence on the board, thus pursuing the type of management policies and close monitoring that was in place prior to the flotation. In untabulated results, underwriter's and sponsor's reputations have also been tested, but the emerging coefficients are not statistically significant.

VI. Conclusions

Using a sample of UK IPOs consisting of VC-backed, PE-backed, and other NB issues from January 1992 to September 2005, this paper demonstrates that PE-backed IPOs are, on average, larger in terms of amount raised, market capitalization, sales and assets, and tend to concentrate on certain industries predominantly related to consumer services and consumer goods. At the same time, PE-backed IPOs are considerably less underpriced than their NB- and VC-backed counterparts and their first-day returns were not affected by the hot market conditions in 1999-2000.

On the basis of different measures and benchmarks for long-run performance, the paper also confirms that PE-backed IPOs achieve positive and significant cumulative abnormal returns, both in equal- and value-weighted terms, through the entire 36-month period in the aftermarket. Alternatively, VC-backed and other NB IPOs emerge as poor performers. The superior aftermarket performance of PE-backed IPOs is positively related to their leverage ratios and the proportion of sponsors' shareholdings immediately after flotation. Although there is also a positive and significant correlation between leverage and the aftermarket performance of NB IPOs, the proportion of such IPOs with total debt to assets ratios comparable to their PE-backed counterparts is relatively small.

These results raise the fundamental question regarding the underlying sources of such performance and its persistence over time. First, it could be argued that conventional performance measurement methodologies do not fully capture the distinctive risks associated with each of the three groups of IPOs. Therefore, the three-year performance of PE-backed IPOs reflects their higher leverage and risk, which is not captured by our conventional risk-adjusted methodologies. A second explanation may be related to the general notion that investors, for reasons not yet fully understood, over or under react to the information available to them on the first day of trading and adjust their valuations later on. A third related perspective is offered by Purnanandam and Swaminathan (2004). They indicate that IPOs overvalued at the offer price tend to run up in the aftermarket and revert to fair value in the long run. As such, they argue that IPOs can be overvalued and underpriced at the same time. The evidence in this paper appears consistent with this view. PE-backed IPOs are, on average, offered at reasonable valuations, but due to the widespread market perception of aggressive pricing by PE sponsors and the high debt ratios at the time of the issue, these issues start trading at relatively modest first-day returns. Investors appear to be taken by surprise by the robustness of their operating performance, the continuing involvement of PE sponsors, and the marked reduction of debt immediately after the IPO. The gradual realization of these aspects of their operations eventually leads to positive aftermarket performance.

My paper still leaves open the fundamental question related to the underlying drivers and management processes that underpin the marked performance differences between VC- and PE-backed IPOs. A detailed analysis of the corporate governance structures, the nature of engagement of PE sponsors, and their adopted operational strategies after flotation may prove fruitful. In this context, one particular aspect of their continuing involvement that may be especially important is the contribution of leverage to corporate restructuring and long-term operating performance.


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(1) Private equity-backed IPOs account for about 30% of the total number of US listings from 2001 to 2008 (Financial Times, 2010).

(2) Financial News, "Private Equity Deals Top U.S. Floats Over Five Years," May 5, 2008.

(3) Hilton, "A Rare Tribute to Private Equity," April 30, 2008.

(4) The Economist, "Crazy Little Thing Called Leverage," May 22, 2010, p. 83.

(5) See, for example, Jain and Kini (1994) for US IPOs in general and Coakley, Hadass, and Wood (2006) for UK VC-backed IPOs.

(6) The AIM started operations only in 1995 but attracted 65% of the total number of issues across the three groups; about three-quarters of nonbacked and just 16% of the PE-backed IPOs were listed in this market.

(7) The role of the underwriter is filled by a Nominated Advisor (NOMAD) for IPOs on the AIM.

(8) The robustness of the results is also tested using the Hoare Govett Smaller Companies (HGSC) index, which represents the bottom 10% of the UK equity market excluding AIM.

(9) The six portfolios are constructed by splitting the population into two portfolios by size and sorting each of the two portfolios into three book-to-price subportfolios. The six portfolios exclude recent IPOs.

(10) The number of companies listed on the two London exchange markets (Official List and AIM) with valid data on Datastream varied considerably over time. The average SMB and HML portfolios are based on an average of 1,500 companies per year.

(11) The high book-to-market portfolio represents the top 30% of all firms on Datastream while the low book-to-market portfolio contains firms in the lowest 30% of the firms' universe.

(12) A similar jump in first-day returns during the Internet bubble is also reported by Loughran and Ritter (2004).

(13) Excluding the three billion plus VC-backed IPOs from the sample reduces the average 36-month buy-and-hold return from -22.15% to -10.82%.

(14) A number of other variables like overhung and underwriters' and private equity sponsors' reputation have also been tested and found not significant.

I am grateful to Bill Christie (Editor), two anonymous referees, Jay Ritter, Meziane Lasfer, Gulnur Muradoglu, Seraina Anagnostopoulou. and Michele Meoli for their helpful comments, as well as participants at the Athens University of Business and Economics and University of Bergamo finance research workshops. I would like to thank the British Venture Capital Association (BVCA) and the London Stock Exchange (LSE) for help with the data collection and financial support. The views expressed herein are those of the author and do not necessarily reflect the views of the BVCA and the LSE.

Mario Levis *

* Mario Levis is a Professor of Finance at Cass Business School at City University, London, UK.
Table I. Annual Distribution of IPOs by Number, Amount Raised, and
Average  Market Value

The total sample of 1,595 IPOs consists of 1,141 nonsponsored (NB),
250 venture-capital-backed (VC), and  204 private-equity-backed (PE)
1POs from January 1992 to September 2005 on the LSE (USM, AIM, and
Official List). The total amount raised is the number of shares
offered multiplied by the offer price. Average  market capitalization
is the offer price by the number of shares outstanding immediately
after the IPO.


          ALL       NB      VC       PE

1992        26       11       5       10
1993        72       26      19       27
1994       111       54      19       38
1995        78       37      22       19
1996       157       92      37       28
1997       123       77      32       14
1998        70       41      19       10
1999        78       67       5        6
2000       224      183      33        8
2001        88       77       7        4
2002        53       41       6        6
2003        58       49       6        3
2004       224      176      23       25
2005       233      210      17        6
Total    1,595    1,141     250      204

                   Total Amount
          Raised (m [pounds sterling])

          ALL       NB      VC       PE

1992     1,735      606     128    1,001
1993     2,054      597     392    1,065
1994     5,238    3,592     411    1,235
1995     1,744      775     362      607
1996     8,697    7,353     588      755
1997     6,193    5,191     578      424
1998     5,599    4,454     717      428
1999     3,953    3,153     130      670
2000     8,146    5,572   2,230      344
2001     3,843    3,265     159      419
2002     4,239    2,103      94    2,041
2003     2,826    1,337      77    1,412
2004     4,490    1,823     244    2,423
2005     4,320    3,314     162      843
Total   63,077   43,136   6,273   13,666

                  Average Market
            Cap (m [pounds sterling])

          ALL       NB      VC       PE

1992       173      230     125      134
1993        67       58      58       81
1994       123      188      60       63
1995        47       36      48       67
1996        98      135      35       58
1997       139      186      57       72
1998       122      127     125       94
1999       176      173      88      282
2000       159      142     263      108
2001        76       73      81      124
2002       162      129      55      496
2003       102       67      60      755
2004        47       29      34      185
2005        45       39      29      290
Total      100       99      84      125

Table II. Industry Composition of IPOs by Number of Issues and Amount
Raised  for NB, VC, and PE IPOs

The total sample of 1,595 IPOs consists of 1,141 nonsponsored (NB),
250 venture-capital-backed (VC),  and 204 private-equity-backed (PE)
IPOs. I report the percentage of IPOs by volume and amount raised for
each of the three groups of IPOs by the 10 FTSE industry


                       ALL      NB      VC      PE

Oil & gas               3.4     4.2     1.2     1.5
Basic materials         7.0     8.8     1.6     3.9
Industrials            16.6    15.0    17.2    24.5
Consumer goods          6.8     5.1     6.4    16.7
Health care             5.6     3.5    16.8     3.4
Consumer services      24.2    22.8    24.8    31.4
Telecommunications      2.2     2.5     2.0     1.0
Utilities               0.8     1.1     0.0     0.5
Financials             18.1    23.0     5.6     6.3
Technology             15.4    14.1    24.4    11.3
Total                 100.0   100.0   100.0   100.0

                              % Amount Raised

                       ALL      NB      VC      PE

Oil & gas               2.2     2.7     0.9     1.2
Basic materials         6.1     8.4     0.7     1.4
Industrials            12.5    10.3    17.4    19.3
Consumer goods         10.6     7.2     2.4    25.1
Health care             2.4     0.9    13.9     1.7
Consumer services      28.6    27.2    21.5    36.4
Telecommunications      5.4     6.6     5.2     1.7
Utilities               3.2     4.5     0.0     0.6
Financials             18.5    23.9     6.6     6.6
Technology             10.0     8.1    31.4     6.2
Total                 100.0   100.0   100.0   100.0

Table III. Summary Statistics for Each of the Three Groups of IPOs

The number of observations shown for each item (in brackets) varies
depending on data availability.  Accounting items in Panel A are from
the last accounts prior to the IPO. The data in Panel B present  the
length of ownership of VC and PE firms before and immediately after
the IPO, the number of years'  investment by VC/PE, and the number of
sponsors involved is from the IPO prospectuses.

                                                NB       VC      PE

Panel A. Operational Characteristics

Number of employees                Median       54       105     425
                                   No. obs.    (576)    (163)   (127)
Market capitalization              Median      16.5     30.2    56.2
  (m [pounds sterling])            No. obs.   (1,141)   (250)   (204)
Total assets                       Median       4.5      7.0    26.4
  (m [pounds sterling])            No. obs.    (839)    (222)   (199)
Net sales (m [pounds sterling])    Median       6.4      5.0    36.0
                                   No. obs.    (699)    (203)   (198)
EBITDA (m [pounds sterling])       Median       0.5      0.2     5.3
                                   No. obs.    (743)    (219)   (199)
Market cap to EBITDA               Median      12.5     14.0     8.5
                                   No. obs.    (587)    (121)   (191)
Asset turnover                     Median      1.18     1.05    1.48
  (Sales to Total Assets)          No. obs.    (702)    (203)   (195)
Operating margin (%)               Median       8.1      5.5    14.8
  (EBITDA to Sales)                No. obs.    (668     (201)   (197)
Total debt to total assets (%)     Median      20.6     20.8    44.1
                                   No. obs.    (620)    (188)   (188)

Panel B. Venture Capital/Private Equity Involvement

Number of years of venture         Mean         NA       4.5     3.7
  capital/private equity group     Median                4.0     3.0
  investment before IPO            No. obs.             (231)   (203)
Venture capital/private equity     Mean         NA      33.9    55.9
  group ownership before IPO (%)   Median               32.4    58.8
                                   No. obs.             (77)    (75)
Venture capital/private equity     Mean         NA      23.1    26.1
  group ownership after IPO (%)    Median               19.6    23.6
                                   No. obs.             (135)   (145)
Average number of sponsors         Mean         NA       1.7     2.1
  in the VC/PE syndicate           Median                1.0     2.0
                                   No. obs.             (251)   (198)

Table IV. First-Day Percentage Returns for the Three Groups of IPOs

The total sample of 1,595 IPOs consists of 1,141 nonsponsored (NB),
250 venture-capital-backed (VC), and  204 private-equity-backed (PE)
IPOs on the LSE from 1992 to 2005. The bubble period extends from July
1999 through June 2000.

                                                         ALL      NB

Average (equal-weighted) (%)                             18.6    21.1
Average (value-weighted) (%)                              9.9     9.8
Median (%)                                                7.3     7.4
Normal period average (equal-weighted) (%)               13.8    14.7
Bubble period average (equal-weighted) (%)               75.1    83.5
Standard deviation (%)                                   53.7    61.9
Proportion starting below offer price (%)                13.0    12.7
Average money left on the table (m [pounds sterling])    12.4    12.4
Total number of issues                                  1,595   1,141

                                                         VC     PE

Average (equal-weighted) (%)                            14.9    9.1
Average (value-weighted) (%)                             8.5    5.7
Median (%)                                               8.8    6.3
Normal period average (equal-weighted) (%)              13.8    9.2
Bubble period average (equal-weighted) (%)              39.5    7.3
Standard deviation (%)                                  23.1   15.9
Proportion starting below offer price (%)               14.0   13.7
Average money left on the table (m [pounds sterling])   16.9    7.3
Total number of issues                                   250    204

Table V. Buy-and-Hold Abnormal Returns

The total sample of 1,595 IPOs consists of 1,141 nonsponsored (NB),
250 venture-capital-backed (VC), and 204 private-equity-backed (PE)
IPOs. For each IPO, the buy-and-hold returns are calculated by
compounding daily returns up to the end of the month of the IPO and
from then on compounding monthly returns for 36 months. If the IPO is
delisted before the 36th month, returns are compounded until the
delisting date. Buy-and-hold abnormal returns (BHARs) are estimated
for four different benchmarks: the Financial Times All-Share Index
(FTA), Size-Adjusted Index (SIZE), FTSE10 Group Industry
Classification (IND), and a style-adjusted (size book-to-market, SBM)
benchmark. Panel A presents equal-weighted abnormal buy-and-hold
returns using three alternative benchmarks: 1) the FTSE All-Share
Index, 2) three size-related FTSE indexes, and 3) industry-adjusted
FTSE indexes. Panel B reports equivalent buy-and-hold abnormal
returns on a market value-weighted basis. The returns are measured as
percentage returns, from the closing market price at the end of the
first day of trading to the earlier of the three-year anniversary or
the delisting day. The t-statistics are reported in parentheses.

Months                             Equal Weighted

                  FTA            SIZE           IND          SBM

Panel A. All IPOs

12              -7.34 ***    -5.20            -4.64        -1.64
               (-2.35)      (-1.84)          (-1.66)      (-0.67)
24              13.44 ***    10.15 ***        11.70 ***    -3.12
               (-3.83)      (-2.99)          (-3.42)      (-0.98)
36             -13.46 ***    -6.95            13.67 ***    -6.11
               (-3.10)      (-1.76)          (-3.18)      (-1.48)

Panel B. Nonprivate Equity Backed

12              -7.29         5.68 ***        -5.14        -1.84
               (-1.82)      (-1.52)          (-1.38)      (-0.58)
24             -17.41 ***    15.22 ***        15.91 ***   (-6.50)
               (-3.75)      (-3.38)          (-3.61)      (-1.64)
36             -20.20 ***    14.23 ***        21.67 ***    12.08 ***
               (-3.61)      (-2.69)          (-3.89)      (-2.34)

Panel C. VC Backed

12             -16.09 ***    12.51 ***        10.12 ***    -7.64 *
               (-3.71)      (-3.00)          (-2.62)      (-1.76)
24             -13.55        -6.85           -12.59        -1.78
               (-1.30)      (-0.70)          (-1.25)      (-0.16)
36              -3.92        -3.42            -4.83         1.85
               (-0.32)      (-0.34)          (-0.44)       (0.20)

Panel D. Private Equity Backed

12               2.96         6.32 ***         4.77         6.70 **
                (0.90)       (2.l0)           (l.50)       (2.07)
24               9.29        14.92 ***        13.85 **     14.72 ***
                (l.53)       (2.63)           (2.l8)       (2.54)
36              13.84 *      22.48 **         21.75 **     18.67 **
                (1.75)       (2.33)           (2.21)       (1.98)

Months                          Value Weighted

                  FTA          SIZE         IND          SBM

Panel A. All IPOs

12              12.24 ***    13.20 ***    -3.86        10.85
                (3.69)      (-3.94)      (-1.15)      (-2.94)
24              -0.06        -2.18         5.69        -1.73
               (-0.08)      (-0.32)       (1.16)      (-0.24)
36               0.00        -1.36         9.22        -4.52
                (0.01)      (-0.14)       (1.56)      (-0.47)

Panel B. Nonprivate Equity Backed

12              11.19 ***    12.23 ***    -4.42       -11.56 **
               (-2.42)      (-2.60)      (-1.20)      (-2.21)
24              -0.04        -1.73         5.52        -4.80
               (-0.03)      (-0.18)       (0.92)      (-0.50)
36              -0.01        -0.01         7.44        -9.49
               (-0.01)      (-0.08)       (0.98)      (-0.73)

Panel C. VC Backed

12              39.20 ***    39.86 ***    24.24 ***   -30.46
               (-5.64)      (-5.58)      (-4.05)      (-4.86)
24             -24.50       -25.10 *     -13.81       -14.63
               (-1.62)      (-1.65)      (-0.96)      (-1.00)
36             -22.15       -22.84        -6.15       -12.98
               (-1.49)      (-1.53)      (-0.44)      (-0.91)

Panel D. Private Equity Backed

12               5.27         4.88         4.69         7.81 **
                (l.35)       (l.26)       (l.09)       (2.06)
24              18.43 **     15.43 *      22.47 ***    22.15 **
                (2.l1)       (l.76)       (2.62)       (2.48)
36              20.0l *      16.60        29.48 ***    23.50 **
                (1.92)       (1.64)       (2.83)       (2.10)

*** Significant at the 0.01 level.

** Significant at the 0.05 level.

* Significant at the 0.10 level.

Table VI. Fama and French (1993) Three-Factor Regressions on
Calendar-Time Monthly Portfolio Returns of the Three Groups of

The total sample of 1,595 IPOs consists of 1,141 nonsponsored
(NB), 250 venture-capital-backed (VC), and  204
private-equity-backed (PE) IPOs. Portfolios of IPOs are formed by
including all issues that were listed  within the previous three
years. RMRF is the value-weighted market return on the FTA
All-Share Index  minus the risk-free rate that is the UK
one-month Treasury bill rate. SMB is the difference each month
between the return on small firms and big firms. HML is the
difference each month between the return on  a portfolio of high
book-to-market stocks and the return on a portfolio of low
book-to-market stocks. The  t-statistics are reported in

                  All            NB            VC           PE

                             Panel A. Equal Weighted

Intercept       0.003          0.003         0.004        0.008
               (1.05)         (1.00)        (0.87)       (2.46)

RMRF            0.969 ***      1.010 ***     0.878 ***    0.864 ***
              (16.48)        (12.90)       (10.74)       (8.78)

SMB             0.023         -0.050         0.407 ***    0.067
               (0.52)        (-1.06)        (5.88)       (1.04)

HML            -0.791 ***     -0.808 ***    -0.798 ***   -0.522 ***
             (-12.30)       (-10.58)      (-10.76)      (-8.81)

Adjusted        0.746          0.723         0.670        0.486

                            Panel B. Value Weighted

Intercept      0.005 **       0.002          0.004        0.007
              (2.08)         (0.60)         (1.25)       (2.20)

RMRF           1.244 ***      1.451 ***      0.969 ***    0.930
             (17.85)        (10.37)        (16.48)       (8.44)

SMB            0.209 ***      0.083          1.023 ***    0.153
              (4.33)         (1.01)        (22.70)       (1.55)

HML           -0.510 ***     -0.530 ***     -0.791 ***   -0.470 ***
             (-9.55)        (-6.62)       (-12.30)      (-5.77)

Adjusted       0.753          0.629          0.813        0.451

*** Significant at the 0.01 level.

** Significant at the 0.05 level.

Table VII. Three-Year Buy-and-Hold Percentage Abnormal Returns by
Cohort Year of Issue (FTA Benchmark)

The total sample of 1,595 IPOs consists of 1,141 nonsponsored
(NB), 250 venture-capital-backed (VC), and 204
private-equity-backed (PE) IPOs during the period January
1992-September 2005. For each cohort of IPOs that were floated in
a given year, the returns are calculated by compounding monthly
returns for 36 months using the FTA All-Share Index as the market

                   Equal Weighted

           ALL       NB       VC        PE

1992       9.12    -4.33    -51.92    48.34
1993      -5.47   -24.21     27.46   -10.26
1994      -2.13    -7.70     67.28   -27.97
1995      -4.87    16.53    -45.30     3.01
1996     -25.33   -22.73    -34.77   -23.59
1997      79.43    54.62    100.55   250.28
1998      40.44    34.78     57.70    32.19
1999     -26.76   -22.92    -48.48   -46.00
2000     -38.97   -38.66    -61.44    24.95
2001     -11.26   -12.50    -11.62    19.39
2002      25.21    12.32      8.37   114.49
2003     -31.75   -24.97   -111.45    54.76
2004     -28.82   -37.34    -47.64    40.98
2005     -45.87   -45.13    -63.50     5.24

                  Value Weighted

           ALL       NB       VC        PE

1992     -56.28   -86.48    -17.79   -17.00
1993      11.55     0.08     59.77    -6.24
1994     -21.26   -22.10     49.29   -54.49
1995      -7.44    62.42    -70.04   -37.10
1996      56.11    74.24    -37.84   -44.52
1997      10.75    -5.93     66.92   372.52
1998      39.98    48.66     52.19   -20.30
1999     -15.68    -9.81    -61.32   -46.11
2000     -46.10   -43.76    -87.72    45.67
2001     -17.48   -18.83    -35.30    21.65
2002      73.05    60.04     38.05    98.66
2003      68.03   118.82    -67.56    28.72
2004      -4.94   -56.45    -57.48    55.03
2005     -17.08   -22.65    -71.17    82.06

Table VIII. Three-Year Buy-and-Hold Abnormal Returns, Calendar
Time Performance of IPOs

The total sample of 1,595 1POs consists of 1,141 nonsponsored
(NB), 250 venture-capital-backed (VC), and 204
private-equity-backed (PE) IPOs. Monthly portfolios for each of
the groups of 1POs include all issues that were floated in the
three years prior to the observation month. Average monthly
abnormal buy and-hold returns are calculated for each calendar
year using the FTSE All-Share Index. Both equal- and
value-weighted calendar time portfolios are rebalanced each

                      Equal-Weighted Returns

                ALL       NB       VC       PE

1993            3.92     3.73   -10.46    20.29
1994           -1.54    -1.64    -3.49    -0.55
1995           -1.46    -9.15    35.08   -12.61
1996           -2.37    -2.89    -6.44     1.65
1997          -18.59   -16.24   -23.14   -19.32
1998          -20.66   -21.74   -18.36   -20.57
1999           91.49   101.03    82.14    52.73
2000          -11.10   -15.08     3.21    -6.67
2001          -31.10   -30.97   -39.80    -8.90
2002          -17.22   -16.72   -26.97    -0.72
2003           33.20    29.59    64.77    35.19
2004           -4.44    -5.17   -22.13    29.12
2005          -19.24   -21.61   -18.17    -6.60
2006          -16.05   -19.73    -7.33    18.54
2007          -13.45   -11.17   -25.56   -26.78
2008 (Sep)    -13.07   -17.07   -13.70    -9.86

                     Value-Weighted Returns

                 ALL     NB       VC       PE

1993          -19.69   -34.46    -6.08    -1.61
1994           -7.36   -11.86    -1.16    -5.52
1995            0.00     2.56    33.28   -16.37
1996            2.33     5.42    -4.19    -7.29
1997          -22.65   -17.28   -44.13   -18.92
1998           -2.78     5.22   -36.57   -15.23
1999           54.61    43.73   131.17    72.61
2000          -27.20   -24.87   -25.04   -44.77
2001          -31.23   -28.97   -48.31    14.74
2002          -20.84   -23.65   -22.82    10.72
2003           37.09    21.94    87.85    37.47
2004           22.92    23.11   -15.19    30.90
2005            3.69     3.64     1.92     5.60
2006           -6.47   -16.99   -15.12    23.31
2007          -11.24    -7.33   -22.75   -18.01
2008 (Sep)    -10.87   -35.26   -11.07    17.83

Table IX. Robustness Checks of Sponsored and Nonsponsored IPO

The sample of 1,595 IPOs consists of 1,141 nonbacked (NB), 250
venture-capital-backed (VC), and 204 private-equity-backed (PE)
IPOs. Buy-and-hold abnormal returns are relative to the FTA
All-Share Index. The results are restricted for each of the three
groups and the entire sample for IPOs with total assets of 40
million [pounds sterling] or greater, total sales of
10 million [pounds sterling]
or greater, and a book leverage (total debt to assets) ratio of
10% or greater. Buy-and-hold abnormal returns are computed for
36 months after the offering. All accounting values are computed
during or at the end of the year of the IPO. The percentage of IPO
included is compound using the number of IPOs with valid abnormal
return data at the 36th month since flotation.

                                        ALL      NB      VC      PE

                                        Panel A. Assets > 40 million
                                              [pounds sterling]

Total assets ([pounds sterling] m)      715    1,086     122     237
36-month BHAR relative to FTA (%)      11.3     18.4    15.6    31.2
No. of IPOs included                    305      180      50      75
Percentage of IPOs included            23.0     18.8    24.7    45.2

                                         Panel B. Total Sales > 10
                                         million [pounds sterling]

Sales ([pounds sterling] m)             852    1,455      96     211
36-month BHAR relative to FTA (%)      18.8     13.9    30.9    22.1
No. of IPOs included                    519      295      79     145
Percentage of IPOs included            39.2     30.8    39.1    87.3

                                        Panel C. Total Debt to Total
                                              Assets > 0.10

Total debt to total assets (%)         29.2     25.9    29.0    38.5
36-month BHAR relative to FTA (%)     -3.65   -14.72   -7.93   30.38
No. of IPOs included                    482      251      87     144
Percentage of IPOs included            50.0     43.0    46.0    76.6

Table X. Raw and Industry-Adjusted Operating Performance

The total sample of 1,595 IPOs consists of 1,141 nonsponsored
(NB), 250 venture-capital-backed (VC), and 204
private-equity-backed (PE) IPOs. The table reports median asset
turnover, operating margin, and leverage ratios for the year just
prior to going public to three years after flotation.
Industry-adjusted numbers are computed as the difference between
the raw medians and industry (10 industries) medians for the
corresponding year. Kruskal and Wallis (KW) (1952) values test
for the median differences across the three IPO groups. Reported
values are the chi-square approximation to the KR test statistic.

                      Raw Unadjusted

         t-1          t+1          t+2           t+3

        Panel A. Asset Turnover (Sales to Total Assets)

NB     118.0          47.8        60.4          68.2
VC     105.3          48.0        65.6          71.2
PE     147.8         134.1       131.4         128.4
KW      14.6 ***      58.9 ***    49.9 ***      40.1 ***

         Panel B. Operating Margin (EBITDA to Sales)

NB      8.4           7.1         5.4            5.2
VC      6.4           8.1         6.8            7.1
PE     15.0          14.4        15.4           14.3
KW     49.2 ***      55.2 ***    64.4 ***       52.1 ***

        Panel C. Leverage (Total Debt to Total Assets)

NB     24.6          11.8               16.7    19.4
VC     20.7           9.7               14.0    17.6
PE     46.5          18.1               15.7    19.5
KW     53.1 ***      17.7 ***            2.8     0.5

                      Industry Adjusted

         t-1          t+1          t+2           t+3

        Panel A. Asset Turnover (Sales to Total Assets)

NB       5.7         -31.3       -21.0         -14.9
VC     -12.0         -38.7       -31.2         -27.8
PE      15.8          10.3         9.6          10.7
KW       6.25 ***     41.7 ***    29.9 ***      24.8 ***

         Panel B. Operating Margin (EBITDA to Sales)

NB      -0.8          -1.2        -3.9          -3.8
VC      -3.5          -1.8        -1.7          -1.3
PE       6.0           5.7         6.5           4.8
KW      49.2 ***      40.4 ***    62.5 ***      50.8 ***

         Panel C. Leverage (Total Debt to Total Assets)

NB       6.5         -2.8          0.1           3.0
VC       6.6         -4.1         -0.2           4.1
PE      29.2          1.0          0.2           2.0
KW      44.2 ***     11.1 **       0.1           0.4

*** Significant at the 0.01 level.

** Significant at the 0.05 level.

Table XI. Multivariate Cross-Sectional Regressions of 36-Month
Aftermarket Performance for the Three Groups of IPOs

The dependent variable is the natural logarithm of wealth
relative with the FTSE All-Share Index as the market benchmark.
The independent variables are the logarithm of the first-day
return, the logarithm of market capitalization at the time of the
offer, the price-to-book ratio at the time of the offer, a dummy
for the bubble period (July 1999-June 2000), the ratio of sales
to total assets (asset turnover), and the total debt to total
assets (leverage) both at the first fiscal year after the IPO,
the proportion of VC/PE shareholdings after flotation, and the
length of VC/PE investment before the IPO and VC and PE dummies.
The numbers in parentheses are White (1980)
heteroskedasticity-consistent t-statistics.


                             (1)              (2)

First-day return            -0.190 ***      -0.147
                           (-1.76)         (-0.94)

Log of market cap            0.044 *         0.034
                            (1.64)          (1.64)

Price-to-book               -0.034 ***      -0.052 ***
                           (-3.30)         (-4.33)

Bubble period dummy         -0.988 ***      -0.834 ***
                           (-5.82)         (-3.85)

Asset turnover                               0.354 ***

Leverage                                     0.907 ***

VC/PE ownership
after I PO (%)

Length of VC/PE of
pre-IPO investment

VC dummy                     0.192 *         0.183
                            (1.67)          (1.48)

PE dummy                     0.627 ***       0.449
                            (5.81)          (3.91)

Intercept                   -0.557 ***      -0.576 **
                           (-2.81)         (-2.27)

[R.sup.2]                    0.132           0.179

No. of observations         (1.308)          (844)


                             (3)              (4)

First-day return          -0.166            -0.968
                         (-1.50)           (-0.41)

Log of market cap          0.073 **          0.075 **
                          (2.43)            (2.13)

Price-to-book             -0.045 ***        -0.072 ***
                         (-3.63)           (-4.79)

Bubble period dummy       -0.848 ***        -0.556 **
                         (-4.56)           (-2.28)

Asset turnover                               0.394
                                            (4.92) ***

Leverage                                     1.152 ***

VC/PE ownership
after I PO (%)

Length of VC/PE of
pre-IPO investment

VC dummy

PE dummy

Intercept                 -0.636 ***        -0.737 **
                         (-2.87)           (-2.39)

[R.sup.2]                  0.110             0.161

No. of observations        (953)             (545)

                                         VC Backed

First-day return             (5)            (6)             (7)

                          -0.320          -0.229          -0.399
Log of market cap        (-0.71)         (-0.53)         (-0.95)

                          -0.044          -0.105          -0.010
Price-to-book            (-0.55)         (-1.48)         (-0.09)

                          -0.015          -0.035          -0.020
Bubble period dummy      (-0.59)         (-1.65)         (-0.77)

                          -1.782 ***      -1.564 ***      -1.371 ***
Asset turnover           (-3.64)         (-3.04)         (-2.27)

                                           0.609 ***       0.814 ***
Leverage                                  (3.58)          (3.75)

                                          -0.045          -0.275
VC/PE ownership                          (-0.10)         (-0.25)
after I PO (%)
                                                          -1.83 **
Length of VC/PE of                                       (-2.30)
pre-IPO investment
VC dummy                                                  (1.36)

PE dummy


                           0.268           0.751 **       -0.776
[R.sup.2]                 (0.60)          (1.83)         (-1.15)

No. of observations        0.190           0.351           0.529

                           (194)           (152)           (77)

                                        PE Backed

                          (8)               (9)            (10)

First-day return         0.846             0.761           0.168
                        (1.43)            (1.28)          (0.28)

Log of market cap        0.008            -0.012          -0.148
                        (0.11)           (-0.17)         (-1.35)

Price-to-book            0.003             0.012          -0.001
                        (0.20)            (0.66)         (-0.03)

Bubble period dummy     -1.539 **         -1.533 **       -2.47
                       (-2.37)           (-2.13)         (-6.55)

Asset turnover                            -0.044           0.053
                                         (-0.40)          (0.48)

Leverage                                   1.364 ***       1.932
                                          (2.73)          (3.28)

VC/PE ownership                                            0.825 *
after I PO (%)                                            (1.80)

Length of VC/PE of                                        -0.041
pre-IPO investment                                       (-0.67)

VC dummy

PE dummy

Intercept               -0.022            -0.153          -0.076
                       (-0.60            (-0.48)         (-0.10)

[R.sup.2]                0.102             0.161           0.275

No. of observations      (161)             (147)           (102)

*** Significant at the 0.01 level.

** Significant at the 0.05 level.

* Significant at the 0.10 level.
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Article Details
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Author:Levis, Mario
Publication:Financial Management
Article Type:Report
Geographic Code:4EUUK
Date:Mar 22, 2011
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