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

See all articles by Narjess Boubakri

Narjess Boubakri

American University of Sharjah - School of Business and Management; HEC Montreal - Department of Finance

Sadok El Ghoul

University of Alberta - Campus Saint-Jean

Omrane Guedhami

University of South Carolina - Moore School of Business

Anis Samet

American University of Sharjah - School of Business and Management

Date Written: October 1, 5

Abstract

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

Boubakri, Narjess and El Ghoul, Sadok and Guedhami, Omrane and Samet, Anis, The Effects of Analyst Forecast Properties and Country-Level Institutions on the Cost of Debt (October 1, 5). Journal of Financial Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2367880 or http://dx.doi.org/10.2139/ssrn.2367880

Narjess Boubakri

American University of Sharjah - School of Business and Management ( email )

P.O. Box 26666
Sharjah
United Arab Emirates

HOME PAGE: http://www.aus.edu

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada

Sadok El Ghoul

University of Alberta - Campus Saint-Jean ( email )

Edmonton, Alberta T6G 2R3
Canada
780-465-8725 (Phone)
780-465-8760 (Fax)

Omrane Guedhami

University of South Carolina - Moore School of Business ( email )

Columbia, SC
United States

Anis Samet (Contact Author)

American University of Sharjah - School of Business and Management ( email )

P.O. Box 26666
Sharjah
United Arab Emirates

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