The Effects of Analyst Forecast Properties and Country-Level Institutions on the Cost of Debt
52 Pages Posted: 15 Dec 2013 Last revised: 2 Oct 2015
Date Written: October 1, 5
We investigate the link between analyst forecast characteristics and the cost of debt financing in international markets, and the influence of country-level institutions. Using a sample of 3,768 bond issues from 42 non-U.S. countries from 1996 to 2014, we find statistically and economically significant evidence that analysts lower bond yield spreads. Further, this relation is stronger in firms operating in countries with weak institutions governing property rights, creditor protection, and disclosure standards. Overall, our findings imply that financial analysts play an important role as information intermediaries, and show that this relation is especially important in countries with weak institutional environments.
Keywords: Analyst Forecasts, Disclosure, Creditor Rights, Cost of Debt
JEL Classification: G34, G32
Suggested Citation: Suggested Citation