Competing for Securities Underwriting Mandates: Banking Relationships and Analyst Recommendations

Alexander Ljungqvist (), William J Wilhelm and Felicia Marston

No 4162, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We investigate directly whether analyst behaviour influenced the likelihood of banks winning underwriting mandates for a sample of 16,625 US debt and equity offerings sold between December 1993 and June 2002. We control for the strength of the issuer?s investment-banking relationships with potential competitors for the mandate, prior lending relationships, and the endogeneity of analyst behaviour and the bank?s decision to provide analyst coverage. Contrary 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 control for analysts? career concerns. In fact, the opposite appears to be the case. We interpret this finding as evidence that credibility is central to resolving information frictions associated with securities offerings. Overly aggressive analyst behaviour undermines credibility.

Keywords: Analyst behaviour; Underwriting; Commercial banks; Glass-steagall act (search for similar items in EconPapers)
JEL-codes: G21 G24 (search for similar items in EconPapers)
Date: 2003-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Journal Article: Competing for Securities Underwriting Mandates: Banking Relationships and Analyst Recommendations (2006)
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