Sell-Side Analysts' Career Concerns During Banking Stresses

64 Pages Posted: 8 Mar 2014 Last revised: 10 Jan 2015

See all articles by Ingmar Nolte

Ingmar Nolte

Lancaster University - Department of Accounting and Finance

Sandra Nolte (Lechner)

Lancaster University Management School

Michalis Vasios

Norges Bank Investment Management (NBIM)

Date Written: February 3, 2014

Abstract

We propose a new approach to examine sell-side analysts' career concerns by relating their forecast boldness to their employers' news flows. Specifically, we use banking sector news to proxy for the severity of career concerns. Analysts follow more closely the consensus forecast when the prospects of the banking sector are negative (and vice versa). The effect is both economically and statistically significant after controlling for various firm, analyst, brokerage house, and forecasting characteristics, as well as sector and economy wide effects. The more established analysts, in terms of reputation and experience, are generally unaffected by banking sector news. In contrast, their less established peers tend to cluster their forecasts near the consensus after a sequence of negative news flows for banks. Collectively, our results support the notion that during banking stresses when job security is low analysts' tendency to imitate others increases.

Keywords: Sell-side Analysts, News Flows, Career Concerns, Financial Crisis

Suggested Citation

Nolte, Ingmar and Nolte (Lechner), Sandra and Vasios, Michalis, Sell-Side Analysts' Career Concerns During Banking Stresses (February 3, 2014). Journal of Banking and Finance, Volume 49, December 2014, Pages 424–441 . Available at SSRN: https://ssrn.com/abstract=2405828 or http://dx.doi.org/10.2139/ssrn.2405828

Ingmar Nolte (Contact Author)

Lancaster University - Department of Accounting and Finance ( email )

Lancaster, Lancashire LA1 4YX
United Kingdom

Sandra Nolte (Lechner)

Lancaster University Management School ( email )

Lancaster, Lancashire LA1 4YX
United Kingdom

Michalis Vasios

Norges Bank Investment Management (NBIM) ( email )

Queensberry House
3 Old Burlington Street
London, W1S 3AE
United Kingdom

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