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http://hdl.handle.net/10397/88879
Title: | Financial analysts' career concerns and the cost of private debt | Authors: | Francis, B Hasan, I Liu, L Wu, Q Zhao, Y |
Issue Date: | Apr-2021 | Source: | Journal of corporate finance, Apr. 2021, v. 67, 101868 | Abstract: | Career-concerned analysts are averse to firm risk. Not only does higher firm risk require more effort to analyze the firm, thus constraining analysts' ability to earn more remuneration through covering more firms, but it also jeopardizes their research quality and career advancement. As such, career concerns incentivize analysts to pressure firms to undertake risk-management activities, thus leading to a lower cost of debt. Consistent with our hypothesis, we find a negative association between analyst career concerns and bank loan spreads. In addition, our mediation analysis suggests that this association is achieved through the channel of reducing firm risk. Additional tests suggest that the effect of analyst career concerns on loan spreads is more pronounced for firms with higher analyst coverage. Our study is the first to identify the demand for risk management as a key channel through which analysts help reduce the cost of debt. | Keywords: | Analysts’ career concerns Cost of bank loans Firm risk Natural experiment |
Publisher: | Elsevier | Journal: | Journal of corporate finance | ISSN: | 0929-1199 | EISSN: | 1872-6313 | DOI: | 10.1016/j.jcorpfin.2020.101868 | Rights: | © 2020 Elsevier B.V. All rights reserved. © 2020. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/. The following publication Francis, B., Hasan, I., Liu, L., Wu, Q., & Zhao, Y. (2021). Financial analysts' career concerns and the cost of private debt. Journal of Corporate Finance, 67, 101868 is available at https://dx.doi.org/10.1016/j.jcorpfin.2020.101868. |
Appears in Collections: | Journal/Magazine Article |
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Francis_Financial_Analysts_Career.pdf | Pre-Published version | 1.45 MB | Adobe PDF | View/Open |
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