Equity Analysts Affiliated with Corporate Lenders

61 Pages Posted: 24 Dec 2009 Last revised: 16 Aug 2011

David C. Cicero

Harbert College of Business, Auburn University

Swaminathan L. Kalpathy

Texas Christian University - M.J. Neeley School of Business

Johan Sulaeman

National University of Singapore (NUS) - Department of Finance

Date Written: August 1, 2011

Abstract

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.

Suggested Citation

Cicero, David C. and Kalpathy, Swaminathan L. and Sulaeman, Johan, Equity Analysts Affiliated with Corporate Lenders (August 1, 2011). Available at SSRN: https://ssrn.com/abstract=1527855 or http://dx.doi.org/10.2139/ssrn.1527855

David C. Cicero

Harbert College of Business, Auburn University ( email )

415 Magnolia Ave.
Auburn, AL 36849
United States

Swaminathan L. Kalpathy

Texas Christian University - M.J. Neeley School of Business ( email )

Fort Worth, TX 76129
United States

Johan Sulaeman (Contact Author)

National University of Singapore (NUS) - Department of Finance ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

HOME PAGE: http://sites.google.com/site/johansulaeman/

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