Pre-IPO Analyst Coverage: Hype or Information Production?

61 Pages Posted: 12 Dec 2017 Last revised: 28 Aug 2019

See all articles by Chunxin Jia

Chunxin Jia

Peking University - Guanghua School of Management

Jay R. Ritter

University of Florida - Department of Finance, Insurance and Real Estate

Zhen Xie

Shanghai University of Finance and Economics

Donghang Zhang

University of South Carolina

Date Written: March 18, 2018

Abstract

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

Jia, Chunxin and Ritter, Jay R. and Xie, Zhen and Zhang, Donghang, Pre-IPO Analyst Coverage: Hype or Information Production? (March 18, 2018). Available at SSRN: https://ssrn.com/abstract=3086114 or http://dx.doi.org/10.2139/ssrn.3086114

Chunxin Jia

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

Jay R. Ritter

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States
(352) 846-2837 (Phone)
(352) 392-0301 (Fax)

HOME PAGE: http://https://site.warrington.ufl.edu/ritter

Zhen Xie

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

Donghang Zhang (Contact Author)

University of South Carolina ( email )

1014 Greene Street
Darla Moore Sch
Columbia, SC SC 29208
United States
8037770242 (Phone)
29208 (Fax)

HOME PAGE: http://https://sc.edu/study/colleges_schools/moore/directory/zhang_donghang.php

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