Working Papers
The Role of Stock Indices in Analyst Career Outcomes and Stock Recommendations (with Vesa Pursiainen)
Abstract: Random changes in firms' stock index membership have important implications on sell-side analysts' career outcomes. Covered firms moving from the bottom of Russell 1000 to the top of Russell 2000 significantly increase an analyst's likelihood of moving to a high-status broker or receiving a career-first All-Star Analyst nomination - particularly for early-career analysts. This is reflected in analyst recommendations. For firms that are just above the index threshold - that might move to Russell 2000 if their share price decreases slightly - analyst recommendations are significantly more negative around the time of defining the index weights that determine index membership.
Asymmetric Information and Corporate Lending: Banks’ Attention to Sell-Side Analysts
Abstract: I find that banks set more conservative lending conditions and increase their screening and monitoring efforts whenever the informational content provided by sell-side analysts on the borrowing firm is reduced. Firms which exogenously lose the coverage of a sell-side analyst experience a significant increase in interest rate spreads and financial covenants tightness. Since sell-side analysts provide information on the entire industry, I find this effect to be more pronounced and economically larger on the subindustry level. To address endogeneity concerns, I use broker mergers/closures, which creates a plausible exogenous drop in the number of analysts a firm/industry receives and which exogenously increases the information asymmetries between insiders and outsiders of the firm/industry. This study provides novel findings on the informativeness sell-side analysts provide to banks and corporate lending outcome.
Managerial Financing Concerns, Earnings Surprises and Security Issuance
Abstract: Managers frequently have a better understanding of their company's quarterly earnings performance than analysts and investors. I find that both the likelihood and the quantity of security issuance increases right before the announcement of negative earnings surprises. This effect is weakest for seasoned equity offerings, stronger for bond issuance and strongest for syndicated loan originations. Being further below the meet-and-beat earnings expectation threshold is associated with stronger issuance activity. To address endogeneity concerns, I use broker mergers/closures to identify changes in analyst coverage that increase the magnitude in earnings surprises, but are exogenous to firm fundamentals. My findings suggest that managers secure funding before having to announce negative earnings news.
Abstract: I find that corporate European leverage variation between 2007 and 2015 is largely driven by firm and industry characteristics. Conventional, time-varying firm characteristics explain as much leverage variation as country and industry fixed effects combined. Cross-sectional leverage disparities are more distinct between industries than between countries. Corporate tax rate does have a significant positive effect on leverage, as predicted by the traditional tradeoff theory. The impact is however negligibly small relative to firm-and industry-specific effects. Evidence on both the tradeoff and pecking order model is, at best, mixed. Moreover, macroeconomic conditions are largely insignificant and unable to explain leverage differences in a linear regression context. Macroeconomic effects on capital structure might however channel through firm and industry determinants, thus affecting financing choice indirectly. A more dynamic, possibly nonlinear model specification is needed. Effects of the financial crisis of 2008 and the subsequent European debt crisis are apparent across all of corporate Europe and are most severe for Southern European firms.
In Progress
A Look of Competence: Academia vs. Industry
Contrast Effects in the Mutual Fund Industry
Abstract: Contrast effects describe a bias where a decision maker perceives information in contrast to what surrounds it. It arises when the value of an observed signal inversely biases the perception of another signal. I find that mutual fund investors perceive fund returns as more impressive if last month's fund returns were bad and less impressive if last month's returns were good. However, I do not find any sizeable effects of fund performance on fund flows when put in contrast to the fund performance of large funds.