The Effect of Bank-firm Relationships on Sell-side Research

Hidetomo Takahashi ()

Journal of Financial Services Research, 2014, vol. 46, issue 2, 195-213

Abstract: In this paper, I examine how the lending relationships between banks and their borrowers affect the quality of analysts’ earnings forecasts after financial deregulation in Japan. My findings show that short-term lending relationships improve the quality of analysts’ earnings forecasts and that these earnings forecasts are useful for predicting future returns. In contrast, long-term lending relationships decay the quality of forecast and are not valuable for the prediction of future returns. These empirical results indicate that the informational advantage that commercial banks acquire is short-term and that the costs of lending relationships surpass the informational benefits in the long run. Copyright Springer Science+Business Media New York 2014

Keywords: Universal banking; Financial deregulation; Conflict of interest; Commercial bank; Analyst forecast; G20; G21; G28 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s10693-013-0170-6

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