Personal Financial Distress, Limited Attention, and Sell-Side Analysts

46 Pages Posted: 5 Oct 2021

See all articles by Hadiye Aslan

Hadiye Aslan

Georgia State University - Department of Finance

Date Written: October 1, 2021

Abstract

By linking sell-side equity analysts to their deed records and LinkedIn profiles, I show that analysts with higher exposure to negative wealth shocks issue more pessimistic and less accurate forecasts. The effects are stronger when analysts have higher leverage in their homes and face career concerns. I also find that stocks recommended by exposed analysts underperform those of non-exposed counterparts, by an amount that is significant and economically large in magnitude. The results remain robust to unobserved skill differences, the potential endogeneity of housing prices, the self-selection of analysts into neighborhoods with certain traits, and placebo tests where housing wealth shocks are randomized across analysts. Collectively, this study provides new evidence on if and how personal wealth shocks impact analysts' work productivity and forecast behavior.

Keywords: Financial distress, Limited attention, Sell-side Analysts

JEL Classification: D10, D91, G41, M41

Suggested Citation

Aslan, Hadiye, Personal Financial Distress, Limited Attention, and Sell-Side Analysts (October 1, 2021). Available at SSRN: https://ssrn.com/abstract=3934675 or http://dx.doi.org/10.2139/ssrn.3934675

Hadiye Aslan (Contact Author)

Georgia State University - Department of Finance ( email )

35 Broad Street
Atlanta, GA 30303-3083
United States

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