Equity Analysts Affiliated with Corporate Lenders
David C. Cicero
University of Alabama - Culverhouse College of Commerce & Business Administration
Swaminathan L. Kalpathy
Texas Christian University - M.J. Neeley School of Business
National University of Singapore (NUS) - Department of Finance
August 1, 2011
We provide evidence that the research of equity analysts affiliated with corporate lenders reflects private information obtained through the commercial lending relationships. Lender-affiliated analysts improve the accuracy of their earnings forecasts on borrowers after a lending relationship is established, and publish more accurate research prior to adverse credit-related events. Lender-affiliated analysts’ accuracy gains increase in their geographic proximity to the lending activity. Furthermore, we find evidence that analysts induce a positive recommendation bias to help secure the lending business. Lending-related informational advantages persist beyond Regulation FD and the Global Settlement, but the strategic use of bias ends with these regulations.
Number of Pages in PDF File: 61
Date posted: December 24, 2009 ; Last revised: August 16, 2011
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