Equity Ownership in IPO Issuers by Brokerage Firms and Analyst Recommendations
53 Pages Posted: 25 Mar 2008 Last revised: 16 May 2023
Date Written: May 23, 2022
Abstract
We examine recommendation informativeness of analysts affiliated with brokerage firms having venture capital ownership in initial public offerings (IPOs) before and after the IPO lockup expiration in a difference in differences design. Affiliated analyst recommendations yield larger absolute abnormal returns than unaffiliated analyst recommendations during the lockup period, especially for stocks with greater information asymmetry. The difference disappears after lockup expirations when venture capitalists generally sell or distribute their holdings. The results suggest that, despite potential conflicts of interest, combining venture capital investment and analyst coverage enhances credibility for affiliated analysts and benefits IPO issuers and public investors.
Keywords: sell-side analyst stock recommendations, IPOs, IPO lockups, asymmetric information, conflicts of interest, venture capital, brokerage firms, universal banking
JEL Classification: G24, G28, G38, G14
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Why Has IPO Underpricing Changed Over Time?
By Tim Loughran and Jay R. Ritter
-
Why Has IPO Underpricing Changed Over Time?
By Tim Loughran and Jay R. Ritter
-
A Review of IPO Activity, Pricing and Allocations
By Jay R. Ritter and Ivo Welch
-
A Review of IPO Activity, Pricing, and Allocations
By Ivo Welch and Jay R. Ritter
-
Why Don't Issuers Get Upset About Leaving Money on the Table in Ipos?
By Tim Loughran and Jay R. Ritter
-
Underpricing and Entrepreneurial Wealth Losses in Ipos: Theory and Evidence
-
Common Stock Offerings Across the Business Cycle: Theory and Evidence
By Hyuk Choe, Ronald W. Masulis, ...
-
IPO Market Cycles: Bubbles or Sequential Learning?
By Michelle Lowry and G. William Schwert
-
IPO Market Cycles: Bubbles or Sequential Learning?
By Michelle Lowry and G. William Schwert