The over-optimism of financial analysts and the long-run performance of firms following private placements of equity
Journal
Finance Research Letters
Journal Volume
10
Journal Issue
2
Pages
82-92
Date Issued
2013-06
Author(s)
Abstract
We set out to determine whether the over-optimism of analysts has negative impacts on the subsequent long-run performance of firms following private placements of equity (PIPEs). Our results indicate that analysts do tend to make over-optimistic forecasts at the time of PIPEs, and that such over-optimistic forecasts can lead to investors erroneously overstating the value of placement firms, resulting in subsequent revisions of their valuations over time. We further infer that when firms announce their PIPEs, over-optimistic forecasts tend to lead to overstated valuations. The evidence shows that the long-run performance of PIPEs has a negative correlation with over-optimistic forecasts. © 2013 Elsevier Inc.
Subjects
Financial analysts forecast | Long-run performance | Over-optimism | Private equity placements
SDGs
Publisher
ACADEMIC PRESS INC ELSEVIER SCIENCE
Type
journal article