Investment Banking and Analyst Objectivity : Evidence from Analysts Affiliated With M&A Advisors

We find evidence that conflicts of interest arising from Mamp;A relations influence analysts' recommendations, corroborating regulators' and practitioners' suspicions in a setting, i.e. Mamp;A relations, not previously examined in research on analyst conflicts. In addition, the Mamp;A context allows us to disentangle the conflict of interest effect from selection bias. We find that analysts affiliated with acquirer advisors upgrade acquirer stocks around Mamp;A deals, even around all-cash deals, wherein selection bias is unlikely. Also consistent with conflict of interest, but not selection bias, target-affiliated analysts publish optimistic reports about acquirers after, but not before, the exchange ratio of an all-stock deal is set