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  • Management Science

Brokerage House Initial Public Offerings and Analyst Forecast Quality

By: Mark Bradshaw, Michael Drake, Joseph Pacelli and Brady Twedt
  • Format:Print
  • | Pages:16
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Abstract

We examine how brokerage firm initial public offerings (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’ bro-kerage 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 ana-lysts and brokers that face more scrutiny.

Keywords

IPOs; Research Analysts; "Brokerage Industry; Initial Public Offering; Employees; Behavior; Outcome or Result

Citation

Bradshaw, Mark, Michael Drake, Joseph Pacelli, and Brady Twedt. "Brokerage House Initial Public Offerings and Analyst Forecast Quality." Management Science (forthcoming). (Pre-published online December 7, 2022.)
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About The Author

Joseph Pacelli

Accounting and Management
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