Lending relationships and analysts’ forecasts
We examine earnings forecasts by sell-side analysts employed by a bank with a lending relationship with the covered firms. We find that lender-affiliated analysts’ forecasts are more accurate than forecasts by their unaffiliated peers after establishment of the lending relationship. Evidence from exogenous variation suggests that the relationship is causal. Lender-affiliated analysts are also more likely to issue pessimistic forecasts below their peers’ consensus. These forecasts are likely to be followed by below-consensus earnings. The results suggest that lender-affiliated analysts enjoy an informational advantage that spills over from lending activities of banks.
Year of publication: |
2015
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Authors: | Ergungor, Ozgur E. ; Madureira, Leonardo ; Nayar, Nandkumar ; Singh, Ajai K. |
Published in: |
Journal of Financial Intermediation. - Elsevier, ISSN 1042-9573. - Vol. 24.2015, 1, p. 71-88
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Publisher: |
Elsevier |
Saved in:
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