Open AccessPresence of analyst before IPO and underpricing: a Meta-analysis.
Author(s) -
Udayan Karnatak,
Chirag Malik
Publication year - 2021
Publication title -
applied finance letters
Language(s) - English
Resource type - Journals
eISSN - 2253-5802
pISSN - 2253-5799
DOI - 10.24135/afl.v10i.431
Subject(s) - initial public offering , underwriting , business , reputation , moderation , information asymmetry , monetary economics , affect (linguistics) , accounting , investment banking , financial system , finance , economics , psychology , statistics , mathematics , political science , communication , law
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.