Analyst Coverage of IPO Firms and Securities Laws: A Cross-Country Analysis
27 Pages Posted: 19 Jan 2013 Last revised: 31 Jan 2013
Date Written: January 1, 2013
We examine, over the period from 1991 to 2010, the influence of legal environment on the ability of financial analysts to discriminate between good and bad IPOs. We find, after controlling for IPO firm-specific characteristics as well as country-specific characteristics, significant difference in the long-run returns of non-orphan and orphan IPOs carried out in countries with high-legal-environment. The opposite result appears in countries with low-legal-environment. This evidence suggests that financial analysts may discriminate between good and bad IPOs only in countries with high-legal-environment. Hence, analyst coverage is informative only for IPO firms which evolve in such countries.
Keywords: IPOs, analyst coverage, securities laws, long-run performance
JEL Classification: G14, G24
Suggested Citation: Suggested Citation