FIN-03-015 |
NYU Stern School of Business |
May 2003
Alexander Ljungqvist, Felicia Marston and William J. Wilhelm, Jr.
ABSTRACT
We investigate directly whether analyst behavior influenced the likelihood of banks winning
underwriting mandates for a sample of 16,456 U.S. debt and equity offerings sold between
December 1993 and June 2002. We conol for the sength of the issuer’s investment-banking
relationships with potential competitors for the mandate and for the endogeneity of analyst
behavior and the bank’s decision to provide analyst coverage. Conary to recent allegations, we
find no evidence that aggressive analyst recommendations or recommendation upgrades
increased a bank’s probability of winning an underwriting mandate once we conol for analysts’
career concerns. In fact, the opposite appears to be the case. Nor do we find that banks competed
successfully for equity deals on the basis of their ability to make low-cost corporate loans
available. Only among debt deals sold since the deregulation of commercial banks is there
evidence of aggressive recommendations helping banks to win underwriting mandates.
Classification: G21, G24
Alexander Ljungqvist
Institution: Stern School of Business, New York University
Phone: (212) 998-0304
Fax: (212) 995-4233
Email: aljungqv@stern.nyu.edu
Home Page: http://www.stern.nyu.edu/~aljungqv/
Felicia Marston
Institution: McIntire School of Commerce, University of Virginia
William J. Wilhelm, Jr.
Institution: McIntire School of Commerce, University of Virginia
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