Equity analysts' recommendation revisions and corporate bond price reactions
Date
2021
Authors
Wei, Xiaoting
Do, Viet
Journal Title
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Volume Title
Publisher
Blackwell Publishing Ltd
Abstract
This paper analyzes bond price reactions to examine the information spillover from equity analysts' recommendation revisions into the bond market. We document a positive relation between bond price reactions and recommendation revisions. On average, bond prices react positively to recommendation upgrades and negatively to recommendation downgrades. The strongest reactions are observed among speculative-grade bonds. While, on average, bond price movements are in the same direction as analysts' recommendation revisions, these revisions can also lead to bond price reactions in the opposite direction to share price reactions. We find evidence of negative bond return reactions relative to share price reactions among firms that are closer to distress, especially when they have high levels of institutional ownership or discretionary accruals. The negative relative price reaction between shares and bonds indicates that equity analyst recommendations sometimes carry security-specific information.
Description
Keywords
analyst recommendation revision, corporatebond, security specific information
Citation
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Source
International Review of Finance
Type
Journal article
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License Rights
Restricted until
2099-12-31