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Investment Banking and Analyst Objectivity: Evidence from Analysts Affiliated with Mergers and Acquisitions Advisors

Listed author(s):
  • Kolasinski, Adam C.
  • Kothari, S. P.
Registered author(s):

    We find evidence that conflicts of interest arising from mergers and acquisitions (M&A) relations influence analysts' recommendations, corroborating regulators' and practitioners' suspicions in a setting, i.e., M&A relations, not previously examined in research on analyst conflicts. In addition, the M&A context allows us to disentangle the conflict of interest effect from selection bias. We find that analysts affiliated with acquirer advisors upgrade acquirer stocks around M&A deals, even around all-cash deals, in which selection bias is unlikely. Also consistent with conflict of interest but not selection bias, target-affiliated analysts publish optimistic reports about acquirers after, but not before, the exchange ratio of an all-stock deal is set.

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    Article provided by Cambridge University Press in its journal Journal of Financial and Quantitative Analysis.

    Volume (Year): 43 (2008)
    Issue (Month): 04 (December)
    Pages: 817-842

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    Handle: RePEc:cup:jfinqa:v:43:y:2008:i:04:p:817-842_01
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    Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK

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