The impact of executive inside debt on sell-side financial analyst forecast characteristics

Avishek Bhandari (), Babak Mammadov () and Maya Thevenot ()
Additional contact information
Avishek Bhandari: University of Wisconsin Whitewater
Babak Mammadov: Florida Atlantic University
Maya Thevenot: Florida Atlantic University

Review of Quantitative Finance and Accounting, 2018, vol. 51, issue 2, No 1, 283-315

Abstract: Abstract Debt-like compensation, referred to as inside debt, is prevalent in US firms and affects firm operating, investing and financial reporting activities. The amount of inside debt can be used to extract information that benefits analyst forecasting activities. This study finds that forecast accuracy increases, while forecast dispersion and revision volatility decrease with the magnitude of inside debt. Further analysis shows that inside debt is associated with increased propensity of firms to provide voluntary disclosures and the documented benefits on analyst characteristics accrue only to firms that offer close to optimal level of inside debt (Jensen and Meckling in J Financ Econ 3:305–360, 1976; Edmans and Liu in Rev Finance 15:75–102, 2011). Our research is the first to link debt-like compensation to financial analyst behavior and contributes to the understanding of the implications of inside debt to outside market participants.

Keywords: Inside debt; Information environment; Analyst forecasts (search for similar items in EconPapers)
JEL-codes: M12 M41 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://link.springer.com/10.1007/s11156-017-0671-8 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:rqfnac:v:51:y:2018:i:2:d:10.1007_s11156-017-0671-8

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/11156/PS2

DOI: 10.1007/s11156-017-0671-8

Access Statistics for this article

Review of Quantitative Finance and Accounting is currently edited by Cheng-Few Lee

More articles in Review of Quantitative Finance and Accounting from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().