Analyst Recommendations and Mergers: Do Analysts Matter?‡
نویسندگان
چکیده
This paper investigates the relation between investment analyst recommendations and merger completion. Unlike the new issues market, we argue analysts’ incentives are skewed to issue recommendations that ensure merger completion rather than maximize the overall deal value. Using a comprehensive sample of completed and withdrawn mergers, we observe the direction and affiliation of recommendations significantly impact the probability of merger completion. These effects are magnified for stock mergers where analysts can directly affect the acquisition currency. In the case of withdrawn deals, recommendations are related to which party is likely to terminate a merger. Overall, our results suggest analyst recommendations are linked to merger outcomes, though those recommendations appear biased to secure deal completion. JEL classification: G32; G34; G21
منابع مشابه
Do Analysts Matter for Corporate Social Responsibility? Evidence from Natural Experiments
We examine the causal impact of financial analysts on firms’ socially responsible activities. Relying on brokerage closures and mergers as natural experiments which generate exogenous changes in analyst coverage, our Difference-in-Differences estimator indicates that a reduction in analyst coverage causes firms to engage more aggressively in irresponsible behavior, especially in the dimensions ...
متن کاملDeterminants of the Informativeness of Analyst Research
Analyst research helps prices reflect information about a security’s fundamentals. However, analysts’ private incentives potentially contribute to misleading research and it is possible that the market fixates on such misleading and/or optimistic reports. We examine cross-sectional determinants of the informativeness of analyst reports, i.e., their effect on security prices, controlling for end...
متن کاملWhat Do Analysts Do ? Investor Decision and the Analyst Remuneration Mode
This paper questions the interaction between security analysts and institutional investors. We focus particularly on the role of analyst remuneration mode in investor decision. To do so, we propose a model in which the investor decides to trade or not to trade regarding the analyst recommendation. First, with a commission-based salary, the analyst is interested in the volume of transactions. Th...
متن کاملInvestment Banking and Analyst Objectivity: Evidence from Forecasts and Recommendations of Analysts Affiliated with M&A Advisors
Previous research finds some evidence that analysts affiliated with equity underwriters issue more optimistic earnings growth forecasts and optimistic recommendations of client stock than unaffiliated analysts. Unfortunately, these studies are unable to discriminate between three competing hypotheses for the apparent optimism. Under the bribery hypothesis, underwriting clients, with the promise...
متن کاملWhen Security Analysts Talk Who Listens?
Regulators’ interest in analyst recommendations stems from the belief that small investors are unaware of the conflicts sell-side analysts face and may, as a consequence, be misled into making suboptimal investment decisions. We examine who trades on security analyst stock recommendations by extending prior research to focus on investor-specific responses to revisions. We find that both large a...
متن کامل