ANALYST BEHAVIOR SURROUNDING TENDER OFFER ANNOUNCEMENTS

We examine the usefulness and credibility of analyst recommendations by focusing on their behavior surrounding tender offer announcements. For our 1998-2001 sample, we find analysts did not identify takeover targets through their recommendations nor did they distinguish between wealth-increasing and wealth-decreasing tender offers. We find some evidence of conflicts of interest in analyst recommendations, but it is confined to the 1999-2000 dot-com period. However, the long-run performance following recommendations suggests that these conflicts have little ultimate cost to investors. 2007 The Southern Finance Association and the Southwestern Finance Association.