34 Pages Posted: 30 Aug 2003 Last revised: 26 May 2010
Date Written: December 1, 2005
Using a sample of all-star analysts who switch investment banks between 1988 and 1999, we examine (1) whether analyst behavior is influenced by investment banking relationships and (2) whether analyst behavior affects investment banking deal flow (debt and equity underwriting and corporate control transactions). Although the stock coverage decision is dependent on the investment banking relationship with the client firms, we find no evidence that analysts change their optimism or recommendation levels when joining a new firm. Investment banking deal flow is related to analyst reputation only for equity underwriting transactions. For debt underwriting and M&A transactions, after controlling for bank reputation, analyst reputation does not matter. There is no evidence that issuing optimistic earnings forecasts or recommendations affects investment banking deal flow.
Keywords: All-star analysts, analyst coverage, market share, investment bank relationships, conflicts of interests
JEL Classification: G24, G32
Suggested Citation: Suggested Citation
Khorana, Ajay and Patel, Ajay and Rau, P. Raghavendra and Clarke, Jonathan, The Impact of All-Star Analyst Job Changes on Their Coverage Choices and Investment Banking Deal Flow (December 1, 2005). Journal of Financial Economics (JFE), Forthcoming; Utah Winter Finance Conference. Available at SSRN: https://ssrn.com/abstract=426060 or http://dx.doi.org/10.2139/ssrn.426060