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Are Underwriter-Analysts More Informed? Scandinavian Evidence

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  • Lidén, Erik R.

    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

Abstract

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.

Suggested Citation

  • Lidén, Erik R., 2004. "Are Underwriter-Analysts More Informed? Scandinavian Evidence," Working Papers in Economics 132, University of Gothenburg, Department of Economics, revised 18 Oct 2007.
    • Handle: RePEc:hhs:gunwpe:0132
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    File URL: http://hdl.handle.net/2077/2784
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    References listed on IDEAS

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    More about this item

    Keywords

    Initial public offerings; Quiet period; Stock recommendations; Underwriter analysts;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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