Abstract
We examine, over the period from 1995 to 2018, the influence of legal environment on the predictive abilities of financial analysts for Emerging IPO markets. We find, after controlling for IPO firm-specific characteristics as well as country-specific characteristics, significant difference in the 12-month returns of non-orphan and orphan IPOs carried out in emerging markets with low legal environment. This result does not hold in emerging markets with high legal environment. The findings suggest that investors disregard analyst coverage when proper laws and regulations are not in place or their enforcement and sanctions are weak or non-existent. As a consequence, investors could have the perception that analysts do not proceed as diligently as in high legal environment.