Pre-IPO Analyst Coverage: Hype or Information Production?
61 Pages Posted: 12 Dec 2017 Last revised: 28 Aug 2019
Date Written: March 18, 2018
We find that analyst coverage and optimism for an IPO before it starts trading have positive impacts on both its offer price revision and first-day return. Pre-IPO analyst research is also positively associated with long-run returns. Analysts with connections to the underwriter are more likely to cover an IPO and provide more optimistic forecasts. The positive impact of pre-IPO analyst research on IPO pricing remains, however, if connected analysts are excluded. Unlike the U.S. and other markets, offer price revisions are negatively related to initial returns in China. Our findings have policy implications for regulations of primary market communications.
Keywords: Analysts, IPOs, Primary Market, Offer Price Revision, Underpricing, China
JEL Classification: G14, G15, G18, G24
Suggested Citation: Suggested Citation