Keywords

brokerage firm IPOs, sell-side analyst research quality, earnings forecast bias

Abstract

We examine how brokerage firm IPOs influence the research quality of sell-side analysts employed by the brokerage. Our main results focus on earnings forecast bias and absolute forecast errors as proxies for research quality. Using a staggered difference-in-differences analysis, we document significant decreases in forecast bias and absolute forecast error during the two-year period centered on the analysts’ brokerage house IPO. In additional analyses, we explore several potential explanations for the short-term benefits of brokerage house IPOs. We find some evidence that IPOs delay the departure of more talented analysts and that the effects are more concentrated among analysts and brokers that face more scrutiny.

Original Publication Citation

Bradshaw, Mark T and Drake, Michael S. and Pacelli, Joseph and Twedt, Brady J., Brokerage House IPOs and Analyst Forecast Quality (March 16, 2022). Management Science, Available at SSRN: https://ssrn.com/abstract=4113433

Document Type

Peer-Reviewed Article

Publication Date

2022

Publisher

Management Science

Language

English

College

Marriott School of Business

Department

Accountancy

University Standing at Time of Publication

Full Professor

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