61 Pages Posted: 24 Dec 2009 Last revised: 16 Aug 2011
Date Written: 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.
Suggested Citation: 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