Journal of Banking & Finance
Volume 32, Issue 6, June 2008, Pages 1120–1132
 

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Daniel Bradley (a), , , Konan Chan (b), (c), (1), , Joonghyuk Kim (d), (2), , Ajai Singhe, (3),
a Department of Finance, Clemson University, Clemson, SC 29634, United States
b University of Hong Kong, Hong Kong
c National Taiwan University, Taiwan
d Korea University, South Korea
e Case Western Reserve University, United States

http://dx.doi.org/10.1016/j.jbankfin.2007.09.021



Abstract

Analyst coverage has been cited increasingly as an important attribute in the selection of an underwriter for a firm about to go public. However, it has also been alleged that affiliated analysts provide biased research. In this study, we examine these interrelated issues by examining the long-run performance of IPOs with coverage from their managing underwriters in a 1993–2003 sample. We find that (1) analysts’ research coverage from their managing syndicate is not related to long-run performance; (2) long-run performance is not different for firms that receive all-star analyst coverage; and (3) investors are not systematically worse off for following lead underwriter recommendations.

Keywords

Analysts’ research coverage;
Initial public offers;
Long-run performance