Career concerns of banking analysts

Joanne Horton, George Serafeim and Shan Wu

Journal of Accounting and Economics, 2017, vol. 63, issue 2, 231-252

Abstract: We study how career concerns influence banking analysts’ forecasts. Banking analysts’ first (last) earnings forecast of the year is relatively more optimistic (pessimistic) for a bank that could be their future employer. This pattern is not observed when the same analysts forecast earnings of banks unlikely to be their future employer. We use the Global Settlement as an exogenous shock on career concerns and show that this forecast pattern is more pronounced after the Settlement. Moreover, we find evidence that analysts benefit from this behavior as analysts that are more biased in their forecasts of potential future employers are more likely to move to a higher reputation bank.

Keywords: Forecast bias; Career concerns; Sell-side analysts; Investment banks; Labor market; Revolving door (search for similar items in EconPapers)
JEL-codes: G14 G24 G28 G32 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:63:y:2017:i:2:p:231-252

DOI: 10.1016/j.jacceco.2017.03.003

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