The impact of all-star analyst job changes
on their coverage choices and investment banking deal flow
Jonathan Clarke, Ajay Khorana, Ajay Patel and P. Raghavendra
Rau
Georgia Institute of Technology, Georgia Institute
of Technology, Wake Forest University and Purdue University
Using a sample of all-star analyst turnovers between
1988 and 1999, we examine (1) if analyst stock coverage
is influenced by investment banking relationships, (2)
whether analyst optimism and recommendations are influenced
by these relationships, and (3) whether analyst behavior
affects investment banking deal flow (both debt and equity
underwriting and corporate control transactions). We
find that while the decision of the analyst to choose
to cover a particular firm is related to the presence
of an investment banking relationship with the firm,
there is no evidence that the analyst changes optimism
or recommendation levels following turnover. We also
document a strong relationship between investment banking
deal flow, bank reputation and the reputation of an all-star
analyst. Other analyst-specific variables such as optimism
bias, changes in bias, recommendation levels, or changes
in recommendation levels do not affect deal flow.
It has been published in the Journal
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