PRESENCE OF ANALYSTS BEFORE IPO AND UNDERPRICING: A META-ANALYSIS
Abstract
The effect of analyst presence on underpricing has shown a contrasting result. By synthesizing the result using meta-analysis for twelve studies with more than 20400 firms we found conclusive evidence of the relation between analyst presence and underpricing of IPOs. With the increase in analyst presence by 1% the IPO underpricing increases by 4.9%. Moreover, meta-regression between effect size and moderator variables found the significant and positive role of the reputed underwriter to increase underpricing when the IPO has coverage of analysts. Our results are striking for the US market IPOs in which reputed underwriters as moderator affect underpricing significantly and positively which shows reputation increase information asymmetry. Whereas in emerging markets IPOs reputed underwriters increase market efficiency and information symmetry.
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