Value versus growth in IPOs: New evidence from Finland

• This paper examines whether there are differences between the performance of value and growth stock IPOs.
• Growth stock IPOs are more underpriced and have marginally higher short-run returns.
• Value stock IPOs provide higher returns during the first three years in the aftermarket.
• The long-run underperformance of IPOs can be largely explained by size, book-to-market, and momentum effects.

This paper focuses on the underpricing and the short- and long-run performance of Finnish initial public offerings (IPOs). More specifically, we examine whether there are differences between the performance of value and growth stock IPOs in the Finnish stock market. Our results indicate that growth stock IPOs are slightly more underpriced and have marginally higher short-run returns. However, value stock IPOs are better long-run investments and provide higher returns during the first three years in the aftermarket. We also document that the apparent long-run underperformance of Finnish IPOs can be largely explained by size, book-to-market, and momentum effects.