Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Sell-side analysts' career concerns during banking stresses
AU - Nolte, Ingmar
AU - Nolte, Sandra
AU - Vasios, Michalis
PY - 2014/12
Y1 - 2014/12
N2 - We propose a new approach to examine sell-side analysts’ career concerns by relating their forecast boldness to their employers’ news flows. Specifically, we use banking sector news to proxy for the severity of career concerns. Analysts follow more closely the consensus forecast when the prospects of the banking sector are negative (and vice versa). The effect is both economically and statistically significant after controlling for various firm, analyst, brokerage house, and forecasting characteristics, as well as sector and economy wide effects. The more established analysts, in terms of reputation and experience, are generally unaffected by banking sector news. In contrast, their less established peers tend to cluster their forecasts near the consensus after a sequence of negative news flows for banks. Collectively, our results support the notion that during banking stresses when job security is low analysts’ tendency to imitate others increases.
AB - We propose a new approach to examine sell-side analysts’ career concerns by relating their forecast boldness to their employers’ news flows. Specifically, we use banking sector news to proxy for the severity of career concerns. Analysts follow more closely the consensus forecast when the prospects of the banking sector are negative (and vice versa). The effect is both economically and statistically significant after controlling for various firm, analyst, brokerage house, and forecasting characteristics, as well as sector and economy wide effects. The more established analysts, in terms of reputation and experience, are generally unaffected by banking sector news. In contrast, their less established peers tend to cluster their forecasts near the consensus after a sequence of negative news flows for banks. Collectively, our results support the notion that during banking stresses when job security is low analysts’ tendency to imitate others increases.
KW - Sell-side analysts
KW - News flows
KW - Career concerns
KW - Financial crisis
U2 - 10.1016/j.jbankfin.2014.03.010
DO - 10.1016/j.jbankfin.2014.03.010
M3 - Journal article
VL - 49
SP - 424
EP - 441
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
ER -