Ajai Singh’s research while affiliated with Texas Christian University and other places

We study analysts' industry recommendations. We find that the distribution of industry recommendations is quite balanced. Analysts show more optimism towards industries with high levels of R&D, past profitability and past returns, as well as industries in which they are active as underwriters. Industry recommendations possess investment value as portfolios based on these recommendations generate abnormal returns. Finally, industry recommendations contain information which is orthogonal to that included in firm recommendations. Analysts benchmark their firm recommendations to industry peers regardless of their disclosures. Consequently, the investment value of analysts' recommendations is enhanced when both industry and firm recommendations are used.

We examine valuation revisions of private targets with a unique sample of acquisitions of withdrawn IPOs. Targets that experience positive valuation changes between their IPO filing and subsequent acquisition are associated with higher acquirer announcement returns. This initially surprising relation parallels the partial adjustment effect observed in IPOs. Our results are consistent with the two prevailing explanations for the partial adjustment effect: compensation to purchasers for the provision of favorable information and behavioral biases in negotiation outcomes that are commonly known as prospect theory.

and seminar participants at UCLA, Duke, Penn State, SUNY at Binghamton, and University of Texas at Dallas for helpful discussions and comments; Honghui Chen, Muku Santhanakrishnan and Vijay Singal for providing some of the data used in the study; and Machiko Hollifield, Harish Raman and Jagadish Pasunoori for research assistance.

We thank Albert Madansky (the Editor), an anonymous referee, seminar participants at BI Oslo, Cergy-Pontoise/Nanterre, HEC Genève, HEC Lausanne, INSEAD, the London Business School, Northwestern University, the Yale Law School, and the Universities of Amsterdam, Strathclyde, Tilburg, Toulouse, Warwick, and Zurich for helpful comments and discussions. This paper was presented at the 1997 Canadian Law and Economics Association meetings, the 1999 American Law and Economics Association meetings, the 1999 Washington Area Finance Association meetings, the 1999 meetings of the International Society for New Institutional Economics, the 2000 Amsterdam ABN-Amro Conference on Initial Public Offerings, and the 2001 Workshop on Information and Financial Markets at the University of Essex. Part of this paper was written while Habib was visiting HEC Lausanne, whose hospitality is gratefully acknowledged. We gratefully acknowledge funding from NCCR-FINRISK (Habib) and the University of Pennsylvania Research Foundation (Johnsen). We are responsible for all errors.