TY - JOUR
T1 - The consequences to analyst involvement in the IPO process
T2 - Evidence surrounding the JOBS Act
AU - Dambra, Michael
AU - Field, Laura Casares
AU - Gustafson, Matthew T.
AU - Pisciotta, Kevin
N1 - Publisher Copyright:
© 2017 Elsevier B.V.
PY - 2018/4/1
Y1 - 2018/4/1
N2 - The JOBS Act allows certain analysts to be more involved in the IPO process, but does not relax restrictions on analyst compensation structure. We find that these analysts initiate coverage that is more optimistically biased, less accurate, and generates smaller stock market reactions. Investors purchasing shares following these initiations lose over 3% of their investment by the firm's subsequent earnings release. By contrast, issuers, analysts, and investment banks appear to benefit from this increased bias, as optimism is more positively associated with proxies for firm visibility and investment banking revenues when analysts are involved in the IPO process.
AB - The JOBS Act allows certain analysts to be more involved in the IPO process, but does not relax restrictions on analyst compensation structure. We find that these analysts initiate coverage that is more optimistically biased, less accurate, and generates smaller stock market reactions. Investors purchasing shares following these initiations lose over 3% of their investment by the firm's subsequent earnings release. By contrast, issuers, analysts, and investment banks appear to benefit from this increased bias, as optimism is more positively associated with proxies for firm visibility and investment banking revenues when analysts are involved in the IPO process.
UR - http://www.scopus.com/inward/record.url?scp=85044765342&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85044765342&partnerID=8YFLogxK
U2 - 10.1016/j.jacceco.2017.12.001
DO - 10.1016/j.jacceco.2017.12.001
M3 - Article
AN - SCOPUS:85044765342
SN - 0165-4101
VL - 65
SP - 302
EP - 330
JO - Journal of Accounting and Economics
JF - Journal of Accounting and Economics
IS - 2-3
ER -