Analyst coverage and IPO management forecasts
Given the all-importance of analyst coverage for IPO firms, we examine the interaction between the initiation of analyst coverage and management forecast disclosure in IPO prospectuses. We find that IPO firms that provide a prospectus forecast are more likely to receive coverage (and earlier), particularly from lower quality analysts. The depth of coverage, measured by the number of analysts issuing a recommendation on the firm, is also greater for forecasters. These results hold after controlling for potential endogeneity due to simultaneity in management decision to provide a forecast and analysts' decision to cover the firm. Further analyses show that reputation concerns matter to analyst coverage decisions — conditional on firms providing a prospectus forecast, the likelihood of receiving coverage decreases with the magnitude of the absolute management forecast error. There is evidence of quid pro quo where the analyst working for the underwriter of the IPO aligns her forecast with the management forecast more than unaffiliated analysts. Insofar as management forecasts are important to coverage decision and analyst coverage is valuable, our research has important implications for strengthening the safe harbour provision for prospectus forecasts in litigious environments such as that in the U.S.
Impact and interest:
Citation counts are sourced monthly from and citation databases.
These databases contain citations from different subsets of available publications and different time periods and thus the citation count from each is usually different. Some works are not in either database and no count is displayed. Scopus includes citations from articles published in 1996 onwards, and Web of Science® generally from 1980 onwards.
Citations counts from theindexing service can be viewed at the linked Google Scholar™ search.
|Item Type:||Journal Article|
|Keywords:||Analyst Coverage, Initiations, Timing, Management Forecasts, IPOs|
|Subjects:||Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > BANKING FINANCE AND INVESTMENT (150200) > Finance (150201)|
|Divisions:||Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
|Deposited On:||21 Jan 2015 22:49|
|Last Modified:||28 Sep 2016 23:13|
Repository Staff Only: item control page