Sell-side analysts' career concerns during banking stresses

Nolte, Ingmar and Nolte, Sandra and Vasios, Michalis (2014) Sell-side analysts' career concerns during banking stresses. Journal of Banking and Finance, 49. pp. 424-441. ISSN 0378-4266

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Abstract

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.

Item Type:
Journal Article
Journal or Publication Title:
Journal of Banking and Finance
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/2000/2002
Subjects:
ID Code:
68867
Deposited By:
Deposited On:
11 Mar 2014 14:18
Refereed?:
Yes
Published?:
Published
Last Modified:
01 Jan 2020 08:51