Orphan versus non-orphan IPOs: the difference analyst coverage makes

This paper addresses the question of the importance of analyst coverage for the long-run returns of IPO firms over the period from 1991 to 2010. In US IPOs, during the one- to five-year horizon, we find a significant long-run abnormal performance by orphans (IPOs without analyst coverage) compared to non-orphans (IPOs with analyst coverage.Further analysis reveals that this outperformance by non-orphans stems from high analyst coverage. Our results are robust after accounting for venture capital backing, underwriting syndicates, underpricing, institutional investor ownership, or operating performance variables.