Are Underwriter-Analysts More Informed? Scandinavian Evidence
Excess returns for Scandinavian IPO-firm initial buy recommendations registered on the First Call database from underwriter analysts (informed analysts) for 1996-2002 were compared to those of non-underwriter analysts (uninformed analysts). Underwriter analysts recommendations outperformed non-underwriter analyst recommendations during the first year after publication, yielding 28 percent higher mean excess returns. Supporting the superior-information hypothesis and contradict earlier research, the result may be explained by two factors: (1) a lower regional competition between banks for winning corporate finance deals in Scandinavia than the regional competition between banks in the U.S.; and (2) an extended analyst coverage of IPO firms today than during earlier periods making it costlier for underwriter analysts to be caught with giving positively biased buy recommendations.
Göteborg University. School of Business, Economics and Law
Version updated 2007-10-18