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THE EFFECTS OF ANALYST FORECAST PROPERTIES AND COUNTRY‐LEVEL INSTITUTIONS ON THE COST OF DEBT
Author(s) -
Boubakri Narjess,
El Ghoul Sadok,
Guedhami Omrane,
Samet Anis
Publication year - 2015
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/jfir.12081
Subject(s) - creditor , debt , bond , yield (engineering) , business , intermediary , sample (material) , monetary economics , financial intermediary , financial system , international economics , economics , finance , chemistry , materials science , chromatography , metallurgy
We investigate the link between analyst forecast characteristics and the cost of debt financing in international markets, and the influence of country‐level institutions. Using a sample of 3,768 bond issues from 42 non‐U.S. countries from 1996 to 2014, we find statistically and economically significant evidence that analysts lower bond yield spreads. Furthermore, this relation is stronger in firms operating in countries with weak institutions governing property rights, creditor protection, and disclosure standards. Overall, our findings imply that financial analysts play an important role as information intermediaries, and show that this relation is especially important in countries with weak institutional environments.