Analyst Behavior and Underwriter Choice

  • Walter I. Boudry
  • Jarl G. Kallberg
  • Crocker H. Liu


We examine the role that analysts play in a firm's choice of underwriter using a sample of major U.S. investment banks. In order to best capture the competitive environment, which is critical to the potential role that analysts play, we limit our sample of firms to 161 real estate investment trusts (REITs) issuing debt or equity between 1996 and 2004. Using the estimation technique of Ljungqvist et al. (Journal of Finance 61:301–340 2006), which accounts for the endogeneity of analyst behavior and the coverage self-selection decision, we find that target prices that are optimistic relative to competitors' target prices, significantly increase an underwriter's probability of attracting underwriting business. This result holds for both equity and debt issues with fees greater than one million dollars. We also find evidence consistent with the notion that increased regulatory scrutiny of conflicts of interest between analysts and investment banks has decreased the impact of analyst behavior on underwriter choice.


REITs Analysts Underwriters 



We are grateful to Yakov Amihud, Stephen Brown, Bill Greene, Victoria Ivashina, Alexander Ljungqvist, Yang Lu, Amrut Nashikkar, Tony Saunders, Jonathan Spitzer, Charles Trczinka and Robert Whitelaw and seminar participants at AREUEA 2007 in Chicago, Cornell University, George Washington University, NYU and UNC Chapel Hill for helpful comments. We thank our discussant, James Booth, and other participants at the October 2008 DePaul University REIT Symposium for constructive criticism. Finally, we acknowledge the assistance of the editor, Jim Shilling, and two anonymous referees in improving this study. Jared Chung and Eric Su provided excellent research assistance. All errors are our own.


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Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  • Walter I. Boudry
    • 1
  • Jarl G. Kallberg
    • 2
  • Crocker H. Liu
    • 3
  1. 1.Leonard N. Stern School of BusinessNew York UniversityNew YorkUSA
  2. 2.Thunderbird School of Global ManagementGlendaleUSA
  3. 3.School of Hotel AdministrationCornell UniversityIthacaUSA

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