Reforms in the early 2000s sought to address potential conflicts of interest by chang- ing the role a research analyst can play in certain investment banking activities. As a re- sult, underwriters cannot guarantee research coverage to a prospective IPO candidate. The regulations also limit a research analyst’s involvement in an IPO (for example, research analysts cannot attend road shows) and restrict the timing of when research reports can
be published in conjunction with an IPO. Despite the change in regulations, it is still im- portant to determine whether an underwriter has respected analysts with expertise in the company’s industry. If the investment bank’s research analyst in the industry has a high stature, it reflects well on the investment bank’s decision to underwrite a company’s IPO, and investors will gain confidence from the fact that the company could receive expert, sophisticated analyst coverage after the offering.