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Journal of Accounting and Economics Vol. 65 No. 2-3 2018

The consequences to analyst involvement in the IPO process: Evidence surrounding the JOBS Act

Michael Dambra1; Laura Casares Field2; Matthew Gustafson3; Kevin Pisciotta4

1 University at Buffalo, State University of New York · 2 University of Delaware · 3 Pennsylvania State University · 4 University of Kansas

Abstract

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.

DOI
10.1016/j.jacceco.2017.12.001
Volume
65
Issue
2-3
Pages
302-330
Language
en
Sources
openalex crossref bibtex:phds-export.bib

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