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Are Analysts’ Recommendations for Other Investment Banks Biased?
Author(s) -
Devos Erik
Publication year - 2013
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/fima.12031
Subject(s) - syndicate , web syndication , business , investment banking , equity (law) , optimism , investment (military) , finance , deferral , financial system , accounting , venture capital , political science , psychology , social psychology , politics , law
This paper provides evidence of a “Potential conflict of interest by equity analysts” who issue recommendations for investment banks that are related to their own bank through syndication. Analysts issue significantly more optimistic recommendations for investment banks with which their bank is syndicated. Recommending banks upgrade their recommendations just before a relation is initiated, suggesting that they use analyst optimism as a means of currying favor with the syndicate lead in hopes of being invited to join. It also appears that as part of a quid pro quo of sorts, relatively optimistic recommendations are rewarded with more syndicate appointments in the year after the recommendations.