Main vs. junior IPO Markets : an empirical study of firm-specific characteristics that affect companies’ choice of IPO market in Sweden

Abstract

This study examines the initial listing decision of firms that are qualified to list on Nasdaq Stockholm main market but choose to list on Nasdaq First North junior market instead. While many of previous studies have focused on explaining firms’ motivation behind going public, very little research has been made on explaining firms’ choice of an IPO market. This study contributes to the existing literature by examining company characteristics of 283 firms that went public in Sweden between January 2007 and November 2019. During this period, 145 companies chose to list on First North junior market even though they were eligible to list on the main market. This is interesting as the main market is considered to be superior to junior market. We use probit analysis to investigate whether firm-specific characteristics affect the choice of listing on the junior market rather than the main market and find that these two markets attract firms with different characteristics. The results show that firms controlled by managerial owners, such as founders and/or CEOs, are more likely list on the junior market. Conversely, firms controlled by institutional investors, such as private equity firms and venture capitalists, are more likely to join the main market. We also find that non-profitable firms are more likely to list on the junior market. However, we cannot find evidence for that the amount of capital raised affects firms’ initial listing choice. In summary, this study suggests that firms’ initial listing choice is not only controlled by exchange listing requirements but also depends on company characteristics. Keywords: IPOs, Nasdaq Stockholm, First North, main market, junior market, listing requirements.