Boissin, Romain (2012): Are financial analysts of IPO firms under pressure: the European evidence.
Download (150kB) | Preview
Long run returns of IPO firms’ recommendations in Europe reveal possible conflicts of interest and pressures faced by financial analysts over the 1991-2005 period. Nevertheless, recent European legislations about investment research have led to better long run performance of IPO firms’ recommendations issued by affiliated analysts over the 2001-2005 period. Findings reveal that market participants do not fully incorporate the perceived value of recommendations. Indeed, difference between affiliated and unaffiliated analysts’ recommendations is statistically significant over one, three or five year horizon. The timing of recommendations specifies that investors pay more attention to affiliated analysts’ recommendations made later in the aftermarket. This result could suggest that the later is the recommendation made in the IPO aftermarket the weaker is the pressure faced by affiliated analysts.
|Item Type:||MPRA Paper|
|Original Title:||Are financial analysts of IPO firms under pressure: the European evidence|
|Keywords:||Initial Public Offering; conflicts of interest; financial analysts; long run performance|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading
G - Financial Economics > G2 - Financial Institutions and Services > G24 - Investment Banking ; Venture Capital ; Brokerage ; Ratings and Ratings Agencies
|Depositing User:||Romain Boissin|
|Date Deposited:||19. Jan 2012 15:04|
|Last Modified:||14. Feb 2013 11:53|
Adams, B., 2003, When they say it does matter : a study of analyst coverage on initial public offerings, dissertation Agrawal, A. and M. Chen, 2008, “Do analyst conflicts matter? Evidence from stock recommendations”, The journal of Law and Economics 51,.503-537 Barber, B. and J. Lyon, 1997, “Detecting long-run abnormal stock returns: the empirical power and specification of test statistics”, Journal of Financial Economics 43, 341-372. Barber, B., R Lehavy and B. Trueman, 2007, “Comparing the stock recommendation performance of investment banks and independent research firms”, Journal of Financial Economics 85, 490-517. Bradley, D., K.Chan, J. Kim, and A. Singh, 2007, “Are there long-run implications of analysts’ coverage for IPOs?”, Journal of Banking and Finance 32, 1120-1132.
Brav, A. and P. Gompers, 1997, “Myth or reality? The long-run underperformance of initial public offerings: evidence from venture and nonventure capital-backed companies”, The Journal of Finance 52, 1791-1821. Chen, X., 2004, “Analysts’ affiliation, ranking, and the market reaction to stock recommendations for IPOs”, working paper, University of British Columbia. Clarke, J., A. Khorana, A. Patel and R. Rau, 2009, “Independents’ day? Analyst behavior surrounding the global settlement”, Annals of finance. Cliff, M., 2007, “Do affiliated analysts mean what they say?”, Financial Management 36, 5-29. Dugar, A. and S. Nathan, 1995, “The effect of investment banking relationships on financial analysts’ earnings forecasts and investment recommendations”, Contemporary Accounting Research 12, 131-160. Fama, E. and K. French, 1993, “Common risk factors in the returns on stocks and bonds”, Journal of Financial Economics 33, 3-56. Irvine, P., 2003, “The incremental impact of analyst initiation of coverage”, Journal of Corporate Finance 9, 431-451. Jegadeesh, N., J. Kim, S. Krische and C. Lee, 2004, “Analyzing the analysts: when do recommendations add value?, The Journal of Finance 59, 1083-1124. Kadan, O., L. Madureira, R. Wang a,d T. Zach, 2009, “Conflicts of interest and stock recommendations – The effects of the global settlement and related regulations” Review of Financial Studies 22, 4189-4218 Lyon, J., B. Barber and C. Tsai, 1999, “Improved methods for tests of long-run abnormal stock returns”, The Journal of Finance 54, 165-201. Michaely, R. and K.Womack, 1999, “Conflict of interest and the credibility of underwriter analyst recommendations”, The Review of Financial Studies 12, 653-686.
O’Brien, P., M. McNichols and H. Lin, 2005, “Analyst impartiality and investment banking relationships”, Journal of Accounting Research 43, 623-650.
Ritter, J., 1991, “The long run performance of initial public offering”, The journal of finance 46, 3-28.
Sapusek, A. 2000, “Benchmark-sensitivity of IPO long-run performance : an empirical study for Germany”, Schmalenbach Business Review 52, 374-405.