Working Papers in Economics,
University of Gothenburg, Department of Economics

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.

Keywords: Initial public offerings; Quiet period; Stock recommendations; Underwriter analysts

JEL-codes: G14; G15; G18; G24

19 pages, First version: June 28, 2004. Revised: October 18, 2007. Earlier revisions: November 19, 2004.

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